An increasing number of business owners and CMOs are now convinced that the digital medium and social media offer massive potential for the growth of their businesses, and have been devoting resources to make it an essential element of their marketing plan.
However, most are finding it difficult to ascertain the effectiveness of their campaigns and to measure the Return on Investment (RoI) and Return on Engagement (RoE) to justify the medium.
The challenge in calculating RoI
The textbook definition of RoI (the benefit from the activity divided by the cost input into it) is difficult to measure when it comes to social media because a large number of its benefits are qualitative (visibility, brand awareness, customer loyalty, trust and interaction), and cannot be accorded a fixed numerical value.
Given the number of metrics that can be tracked, it’s easy for your calculations to go nowhere if you don’t choose the right ones. Methods and models to measure RoI are constantly evolving but a standardised practice has not yet been developed. This is why calculating RoE is equally important.
This is not to say that RoI cannot be measured at all. In fact, it is absolutely necessary and can definitely be done but there is no one-size-fits-all method for all businesses. The calculation is wholly business-specific — every undertaking has different goals and objectives, and different metrics have to be employed to evaluate these targets.
For example, an e-commerce business that sells products online can calculate RoI more easily than the one that doesn’t. We work with many retailers, real estate companies, hospitals and malls, for whom it isn’t always possible to track the RoI. It is therefore, extremely important that the effectiveness of a campaign be measured in the context of one’s business goals, to help determine its business value.
Defining business goals
You need to clearly define the outcomes and purpose of your social media strategy — why you are doing it? What exactly do you want to achieve? By when do you want to reach it? This will differ from company to company and such include end-results as:
~ Increase in brand awareness
~ Lead generation
~ Increase in website traffic
~ Increase in customer acquisition
~ Increase in sales and revenue
~ Engagement with customers
~ Establishment of trust-based relationships with target audience
~ Reduction in customer service cost
~ Improvement in customer retention and loyalty
For example, a start-up or a new brand’s goals might lean more towards brand awareness, customer retention and engagement, whereas, for existing brands and companies, it could be a mix of multiple goals. Sometimes, the goal is singular — many of our real estate clients come to us with the goal of generating more leads.
Measuring intangible benefits
Intangible benefits, or RoE, from social media (visibility, brand awareness, customer loyalty, satisfaction, trust, valuable customer interaction and feedback) offer long-term business benefits.
If the purpose of your social media strategy is to increase brand awareness and build an engaged and relevant following, then key metrics, such as reach, engagement and number of fans/followers, need to be tracked. These are commonly known as return on engagement.
A leading glass manufacturer we work with uses metrics of engagement to understand not just what content is performing better but also what products are being accepted by their audience of architects and interior designers.
Further, data concerning popular perception, feedback and sentiment about your brand too can be gauged using tools such as Meltwater or SocialMention or Radian6. A good understanding and analysis of these metrics can help measure the effectiveness of the campaign in terms of building brand awareness and brand recall.
We often use these tools for clients whose focus is not just direct sales and revenue. The reputation of the brand and how that is managed is more crucial.
Measuring tangible benefits
Website traffic, leads, conversions and sales are the most important metrics for a business which directly impact profitability.
Google Analytics or MixPanel (for Apps) are excellent tools to track the number of website conversions that come from various social media accounts while other paid tools like MozAnalytics and KissMetrics are also available.
Calls and emails too can be tracked through CRM and cloud telephony tools like Knowlarity, which help attribute the result to the right channel (be it Facebook, Google, Instagram, Linkedin, Display Advertising or other mediums). Keeping track of advanced metrics like cost-per-lead and cost-per-conversion help give a better assessment of the campaign and make it easier to quantify benefits relative to the cost of acquiring them.
For many of our real estate clients, cost-per-lead can vary from ₹2,000 to ₹5,000 whereas for ecommerce and retail clients, cost-per-conversion (or cost per order) can be as low as ₹250. It varies depending on the industry and product. Only when everything is tracked can it be controlled and improved upon.
At the end of the day, everything digital needs to be tracked, measured, refined and improved to reach the desired business goals and desired return on marketing efforts.