Return-on-investment (ROI) is the single most important metric for marketing. Without this crucial figure, it’s impossible to know whether or not your efforts have paid off.

For example, imagine you’re spending 15 hours and $100 per week to get your brand in front of relevant audiences on social media. You use both organic and paid advertisements, follow the lead of others in your industry, and develop content your audience will likely engage with.

Social media managementMaybe those efforts have brought in new leads. Maybe some of those leads became clients. But that doesn’t mean the whole process has been profitable.

Over a one-month period, you would have spent $400 of capital and 60 hours of employee time. If you created nine conversions for a product costing $40, you would have only generated $360 in new revenue, meaning you have been operating at a loss all along. On top of the negative profits, you have wasted a great deal of time.

Without calculating your ROI, you have no way of recognizing this. The pattern could repeat itself until the business collapses, and in these situations, it often does.

Calculating Social Media ROI

How do you make sure you’re not another victim of this vicious cycle?

Calculate social media ROI. To do this, simply subtract your marketing costs from your revenue, then divide the result by your marketing costs. The result will be your ratio of results to initial investment, also known as ROI.  

Following the example above, 400 – 360 = 40. 40 divided by 400 is 0.1. This means your ROI ratio is 0.1 to 1, or negative 10%. In other words, you’ve been losing 10% overall.

If your ROI is in the red, don’t feel bad. It’s better to be aware of it than it is to continue operating at a loss. Once you’re aware of the problem, you can take the measures necessary to either increase revenue or decrease marketing costs, resulting in a positive ROI ratio.

To do that, you have to set SMART objectives. A SMART objective is one that’s specific, measurable, attainable, realistic, and time-based. Just like ROI itself, you have to be able to measure the result of an objective that is realistically achievable. Such a goal must also be specific and rooted in firm time restraints. A goal with these characteristics can accomplish just about anything.

Performance First Marketing will ensure your social media marketing ROI is always in the black. Contact us today.   

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By on July 11th, 2018 in News