There is simply no point in making an investment unless that investment delivers a measurable return - is that not the truth? One wouldn’t buy a house or company unless they felt confident it would make them money, in the same way a company wouldn’t choose to invest in an advertising or marketing campaign unless they felt confident it would increase their profits as a result.
Return-On-Investment (ROI) is a key performance indicator often used by businesses to determine how profitable an investment or expenditure is. It is a non-negotiable measurement of how successful business-related actions are, and takes the guesswork out of investment decisions entirely.
When it comes to social media in particular, generating an ROI is more important than ever. Managing a handful of social media platforms - including Facebook, Twitter, Instagram and possibly more - on top of successfully running an entire business can be extremely time demanding, and there is little point in focusing your energy into developing a social media strategy and campaign if you aren’t using measurable indicators to determine whether those efforts are worthwhile.
Measuring social media ROI is critical to securing buy-in and budget for your social strategy. The CFO won’t allocate a budget to social media efforts if it cannot be proved that those efforts will lead to measurable results. It also shows companies what is working and what isn’t, so that they can shift their resources and tactics to be more effective if necessary.
Emil Khoury, Chief Strategist at HESK Digital, a one-stop digital agency that specialises in helping businesses achieve their goals and objectives, says that the days of customers simply wanting their social profiles and websites to “look sharp” are long gone.
“What businesses need and want now are measurable results - they want to generate leads, boost site conversion, and ensure business growth and profitability,” he explained.
“Every strategy we provide concentrates on driving traffic to clients’ websites and making sure that they are quality leads that convert to sales and profits.”
Research studies have proven time and time again that having a strong social media presence or strategy can result in improved business, greater profits and a better relationship with customers. Nielsen research indicates that roughly 39 percent of social media users believe the importance of social media in a business sense lies in discovering and learning about a brand’s new services and products, while another study from the University of Michigan found that customers spend 10 percent more after joining a company’s own social networking platform, on average.
The study, which involved monitoring data on customer activity 15 months before companies’ online networks were established and 15 months after, found that among social media followers, followers could recommend products, share reviews, create favorite lists and socialise with each other online upon joining those communities. The study also found that a network member with more “friend” connections was more likely to spend more.
Another study, led by the International Journal of Research Marketing, found that engaging users through social media enhances the brand loyalty, fuelling a stronger relationship between the consumer and the brand. Findings indicated that social media use is almost always positively related with brand relationship quality.
The concept is quite straightforward. Customers who buy from a business in the long-term are generally more valuable than one-time customers, and the same is true of a social media follower. They will likely drive greater business value through not only repeat purchases, but through recommendations to friends.
“They’re more likely to drive even greater value for your business since they are more likely to share your content, advocate, defend your company, create content about your business and more, both online and offline,” said Brian Honigman, a social media consultant.
But none of this can happen unless businesses develop a strong social media strategy, one that consists of clearly defining their social media campaign goals, identifying a target demographic, using social media insight metrics to measure success, and monitoring ongoing success via Google Analytics.
The importance of getting this right cannot be understated: studies have shown that although the vast majority (roughly 77 percent) of marketers and companies are using at least one social network to promote their brand, it doesn't necessarily mean they are generating significant ROI from it.
One study, which interviewed 111 marketers from a mixture of B2B and B2C companies regarding their use of social media, found that there was a big divide in the marketing community about the perceived effectiveness of social media marketing. Only around 48 percent of marketers said they see a regular return on investment using social media, which suggests many are either failing to develop appropriate social campaigns or that they are not measuring social media’s impact very effectively.
Social media can be highly effective in building brand loyalty, showcasing new services and products, and ultimately delivering ROI as the grand result. But companies must approach social media properly, and invest time and effort in developing the right strategy if they wish to achieve a strong ROI.