The number one question I get from readers of my social media guide for small business is “how do I calculate return on investment (ROI) for my social media efforts?”
And what a good question it is! (aka show me the money).
If you are a solopreneur or small business owner you are likely to be curious to know that the time you’re spending on social media is paying great dividends for the resources you are spending on it. At least I hope you are curious about this.
Typically you’ll measure your resources as your time (or the time of the employees you are paying) and the cash costs of your social media strategy implementation. This will include design work you outsource, plus any other set up and social media admin work you outsource. There may also be some software costs if you are using premium social media software services.
If you need to sell the business case of a social media marketing strategy to your investors, partners or your boss, ROI is one of the first questions you are going to run into. What will this cost, and what will I earn from this? Oh…and when will the dosh come rolling in (a.k.a. Show me the money!)?
So here’s the quick answer.
The first two stages of the social media process I outline in my guide are (1) getting clear and measurable business goals and (2) having a clear focus and call to action on your main website – be that an html site or a blog.
These are the two areas that work in your favour in pitching the idea of investing in social media for business purposes.
In order for your business goals to be specific and measurable, they need to be outcomes focussed. For example
Your goal is the be the number one selling (by unit volume) online provider of wholesale plain cotton t-shirts in your province, state, county etc. By doing some research you find that the current market leader is selling 8400 units per month on average over the last year.
If you are not able to get that data, then you cannot use that goal as your business goal! If it is not measurable then it is not a useful goal.
In the event that you can measure this specifically (e.g. 8400 t-shirt units) then you set a goal of 9000 units per month. Either this is achieved or not. You will include a timeframe and other variables to make it as measurable as possible. (Review that stage in the guide).
Your marketing goal may then be to increase your current sales of 7200 units by 1800. In order to that you need to secure 80 new t-shirt buyer enquires per month (signed up through your website or blog).
By setting up a clear call to action and reason for prospective buyers to want to complete a “Contact me” form, you will have set the foundation for your social media campaign.
Although this takes a bit of time, your social media presence must deliver that promise (or part of that promise) in order to advance your business goal success.
If your company is also embarking on other online marketing activities (example paid search, banner advertising etc.) you will need to propose a percentage of leads that social media will generate.
To sum it all up…
Clear and measurable business goals lead to clear and measurable marketing goals. Social Media marketing through the social media networks you establish should be measured against these clear goals in terms of conversions, visitors, brand mentions or whatever the measure is that delivers on your marketing goals.
There are many many applications online for measuring followers, percentage of clicks on a posted link and all the other measures you need to establish exactly where your campaign success is coming from.
The failure to establish clear ROI in social media campaigns and broader strategies is usually a result of poorly defined business and marketing goals.
What do you think? What is your experience of this?