How to Calculate Your Social Media Marketing and Social Advertising ROI

Social media ROI is a hot topic for businesses. Has your business ever wasted resources on social media marketing internally? Or, hired a social media marketing expert who didn't deliver actual business results? Whether you are investing your own time or a good chunk of change into your social media marketing programs, you expect a healthy return on your investment. One of the up-and-coming experts in Social ROI is Gene Davis of Visibly Social. He joins us to chat about what's [really] working in social media marketing and social media advertising, so you can make the most of your social media marketing and PPC budgets.


Many social media marketers fail to focus on the ROI (Return on Investment) in their social media programs. Why is this? Why do you place a strong emphasis on ROI?

Most marketers fail to focus on the ROI in their programs because they are more focused on the vanity metrics of social media. For example, the reach number of a post or how many likes they received or how many comments they got. This looks good but doesn’t impact the bottom line. Having 100,000 “Likes” is like having $100,000 in Monopoly money. It doesn’t mean anything in real life. Now if that 100,000 “Likes” equated to 100,000 people who actually made a purchase, now we’re talking. I place more emphasis on how many people clicked on an ad and actually messaged your company or called your office. This way you can actually see the return on your marketing costs instead of just how many people “Liked” something on your page.


You mention that you don’t focus on vanity metrics, like website traffic, because businesses don’t really care. How do businesses distinguish vanity metrics from actionable metrics?

Most business owners only care about how many products were sold or how many people bought their services because of my marketing efforts. Having a lot of traffic to a website is a great thing, don’t get me wrong, but as a business owner you are only in business if that traffic buys something. Having a lot of traffic to a website and no one purchases anything is like having a beautiful store in the mall that everyone walks past just to window shop. You will soon find that pretty store closed down because none of that traffic made a purchase.

The way businesses can distinguish vanity metrics from actionable metrics is by measuring the actions taken after the click. For example, using a call tracking number for people that called the number on an ad. Or using the number of opt-ins or direct messages received from an ad.


What’s the value in running a competitive analysis to see how you measure up to the competition? Is this to help with benchmarking?

The value in running a competitive analysis is for you to see where you lack in comparison to your competition, and you can implement what they do well into your marketing. I run a competitive analysis for all my clients because it lets them know how much work we will have cut out for us. Yes, this is perfect for benchmarking. For example, I have a client that is just starting to advertise on social media and is looking for 1000 new followers in 90 days. I pull up their biggest competitor and show them how long it took for them to get 1000 followers. This helps keep expectations in order and gives them an idea of how much effort is needed to achieve their goals.


What are the most important metrics for calculating social media ROI? Is there a simple formula you use to help your clients figure out ROI?

To me, the most important metrics for calculating social media ROI are shares, opt-ins or messages to your business. The reason shares are a good metric to pay attention to is because if someone is sharing your content, they are multiplying your chances of getting more customers because your ads are now being exposed to their contacts and people outside of your targeted list. Opt-ins are great because it increases your overall list and you now have the ability to sell other products to them and market them in other ways (email, SMS). Messages to your business are the golden ticket, these people are obviously eager to know more about your business and/or ready to buy now.

In regards to a simple formula, I don’t really think there is one. This is the beauty of social media, it's a fluid channel. There will always be new platforms popping up and new ways to get a better ROI, it just depends on what channel you are using and what the main goal of your campaign is.


Which tools would you recommend for those interested in tracking their ROI?

Google Analytics is by far the best tool. You can even connect it to your Facebook ads, and it will break down most of the metrics you need.


How can companies achieve positive ROI from their social media activities?

The best way to achieve a positive ROI from your social media activities is to find someone in your industry that is doing really well and use tools like SEM Rush, Alexa or Quantcast to replicate the areas where they excel. For example, if you are a small flower shop, I would use those tools to see what 1-800-Flowers is doing well: from their landing pages, to the ads they run in Adwords, to the ads they have on Facebook. Then, use that as a template for your ads. There is no need to reinvent the wheel. There are always bigger players in almost every space. Just find out what and how they are marketing, take that info and apply it to your business. Once you do this, test each campaign and trim the fat where things aren’t performing well for you.


What are some common misconceptions businesses and brands have about social ROI?

One big misconception businesses have about social ROI is that you need thousands of followers to actually see a return. Well that isn’t true. If you did Facebook Messenger ads, which have an 80% answer rate, your follower count has no impact on the people who will actually respond to your advertising.

Most people also think you need to dump thousands of dollars into an advertising campaign on Facebook to see a return. This also isn’t true. If businesses just stopped sending someone who clicked on their ads to their website and kept them inside of the Facebook platform, that will save them money because Facebook charges less per click for this. Also, when businesses advertise and then send the person who clicked on the ad to their website, most of them leave without making a purchase. This is because your ad is about a specific thing, and your website has information about ALL things that your business does. This causes the customer to read through your website, get sidetracked and never purchase.


You’re an expert when it comes to social media advertising and PPC advertising. I’ve heard that you need tens of thousands of dollars to “experiment with” before you will see ROI from these investments. Is that true? Why or why not?

That is not true unless you are trying to run a national campaign. Most businesses want to take care of the customers in their own backyard, so if they only focused on their local areas they could see a great return with budgets as low as $500 per month.

The key with both social media and PPC is to really get laser focused on your target, from what is their main pain point, where they search for answers to their problem (Facebook, Google or Pinterest etc.) and why they need your services vs the competition. Most businesses when they do local advertising don’t think about their ads from the customer’s perspective, which is the main reason their advertising fails. When business owners really understand these things, they will find themselves not needing thousands of dollars to experiment with because their advertising is speaking directly to their target customer.

Start local, make sure your “Google My business” info is correct, make sure your “Google Search console” information is correct. In combination with the things mentioned above, you can start to see a return on social media advertising or PPC, for about $15-20 per day.


Do you think every company should be active on every social channel? How do businesses or brands determine which channels will drive the most ROI for their business?

ABSOLUTELY! Think about this for a second, if you go outside, out of the next 10 people you see I can guarantee that at least 6 of them are on their cell phones. Which means they are probably either on social media or looking up something on Google. So if you are in business, you need to be where they are.

The way to find out which channels drive the most ROI is simple. First, you need to survey your current customers and ask them which channels do they spend most of their time on and which channels do they find easier to communicate through. Then run on ads on those platforms and split test them against each other for clicks, responses, shares etc.

For example, if the majority of your current customers don’t use Pinterest, it's not in your best interest to advertise there. You can have a Pinterest page, but you should link back to a social channel that you and most of your customers use because it’s easier to maintain and respond in a timely manner.  


If you had three pieces of advice to share around social media ROI, what would they be?

  1. Consistency is key. If you don’t post regularly or advertise regularly, you WILL NOT see a return.
  2. Really nail down on who your target customer is. Everyone can’t be Wal-Mart and try to be all things to all customers. Focus on what your customers come to you for and speak to that thoroughly and consistently. You will see more customers come to you because you are the authority in that space
  3. Don’t get caught up in vanity metrics. Just because you don’t have thousands of likes doesn’t mean social media cannot work for you.


Anything I didn’t ask?

Yes, social media advertising isn’t easy, even though it may look like it. Digital Marketing is analytical, psychological and very detailed. Business owners should at least consult with specialists before “experimenting” with it and saying that it doesn't work. Think of it like this, if you had a toothache, would you pull your own tooth just because you can and it looks easy? Or would you talk to a dentist first?

About Gene Davis:

Gene Davis is an expert at turning social media followers into customers. You can learn more about his boutique digital marketing and advertising agency and check out his soon-to-be blog at Visibly Social. Then, follow him on Facebook for cutting-edge social media marketing tips and best practices.