30 damn truths about social media ROI

What is Social Media ROI

1.Understand Social Media ROI. Social Media ROI is the financial return of your activity on social media.

2.Understand the ROI of Marketing. In marketing and communications, ROI has been measured from a long time ago: ROIM (ROI of Marketing).

3.Use a percentage (%). ROI is an indicator measured in percentage, calculated from the comparison between measured costs and monetary benefits.

4.Know the ROI equation. Social Media ROI equation is: ROI = [(Benefits – Costs) / Costs] x 100 = [Net Income / costs] x 100.

5.Know the % ROI indicator. ROI in % tells you how much money you have earned (net) per each dollar that you invested in the activity.

6.Measure your costs and benefits. Social Media ROI can be measured, but it requires measuring the costs and benefits, as some benefits are intangible, difficult to measure. But it is not impossible: everything is measurable.

7.Measure the ROI of all channels. There are stubborn people wanting you to measure the ROI of social media when they have never considered measuring the ROI of other channels, whether online or offline.

8.Learn to differentiate between what is ROI and what it is not. There are stubborn people saying you cannot measure social media ROI, others say you should not even try it! Some even invent new ways to measure ROI… but what they measure it is not actual ROI, since they do not express the calculation in currency.

9.Simulate scenarios. You cannot measure social media ROI before you start a project, action or campaign.However, in any case you can estimate it or perform a scenarios simulation.

10.Learn finances. To measure social media ROI properly you need to have basic knowledge of finance, business, strategy, marketing and communications, not just Social Media!


11.Know your costs. To measure the ROI of Social Media in your actions you need to know your costs.

12.Focus on key areas. You can focus on the 3 main areas: human resources, technology, and other operating costs.

13.Measure your human resources. Human resources costs are the costs of consulting, training, start up, the community manager’s salary and, do not forget, your time.
14.Measure your time. Possibly the cost of your time is the most difficult part to measure; use the concept of opportunity cost (ie, how much time will win if you dedicate yourself to other tasks?).

15.Measure your technology. The technology costs are generally less important. You already have a computer, and the monthly cost for the necessary software tools to manage and monitor social networks are usually inexpensive, it is even possible that the free versions serve you.

16.Measure other costs. When evaluating other operating costs you should not forget the costs of content generation, online and offline advertising, and you might want to generate community using competitions.

17.Calculate the costs. Time and technology are relatively easy to obtain and estimate. The costs related to human resources can be obtained through quotes, market reports or asking to your colleagues.

18.Invest in a good community manager. A cheap community manager can be expensive. Check sentence #10 (cost vs. investment).

19.Perform cost scenarios. If you estimate a priori Social Media ROI, it is convenient to work with several possible costs. For example, a mean value and a range between + / -20%. However, usually the costs are usually quite clear and certain, and there are no major changes, but check your numbers well.

20.Differentiate between cost and investment. Finally, once you have had all the estimated costs, ask yourself: is this cost going to help generate profits? If the answer is “yes” then it will no longer be a “cost”, but an “investment”. Remember the third word in ROI is “investment” (Return on Investment).


21.Know the benefits of your actions. To measure the ROI of your actions you need to know the benefits achieved with your actions. These benefits must be measured in the same unit you measured your costs: currency.

22.Focus on three measurement areas: customers, cost reduction and brand image.

23.Understand the benefits associated to clients. They are attracting new customers and improving sales, and/or profit margins on existing customers (cross-selling, up-selling).

24.Measure the cost reduction. Social Media can help you reduce costs, which is also a benefit that you should measure.

25.Understand cost reduction measures. Some cost cutting measures are customer care, improved internal communication costs, or savings in market research.

26.Measure the intangibles, like improved brand image, which can also be measured in currency.

27.Consider the right benefits. You should only consider those benefits where there is a clear relationship between your social media actions and the benefit.

28.Identify the benefits. To help in the task of identifying benefits you can use the sales funnel, because it will force you to closely monitor your sales. Using the coefficient of correlation you can check if there is evidence of causality.

29.Estimate profit scenarios. As with costs, it is convenient to work with ranges of possible values. In the case of benefits, since some values ​​are approximate (eg, intangibles), when calculating the ROI of an activity you should be working with different scenarios.

30.Use measurement methodologies. There are no tools that measure your ROI automatically, you must estimate your values for each case. However, there are methodologies that apply average values, or benchmark values. Be careful and use the data in your industry and/or product… but with care.


Any other truth you would include?


* A version of this post was first published on Socialancer.com, 9th November 2012. Original in Spanish.