Here’s an attempt to approximately calculate the ROI of Social Media Marketing… with a terrific tactic to generate more sales inside.
Almost since inception, Social Media Marketing’s very first intention has been to build communities and support Brand Awareness.
It will still be the case in 2020 (for 64% of Brand Managers who have been challenged recently on that topic), as many companies – and celebrities – keep on struggling with that stage.
And they don’t even call me to get some help! :-)
That said, I believe that we are entering a new era.
The growing priority for brands that have built a decent-sized community is to start getting some Return on Investment (ROI) from these efforts.
“What is the ROI of my marketing efforts?”
I have heard that question from clients every day for the last 25 years, and for 80% of them, my answer was: “I don’t know.“
We know we have to do what we do, and we can’t quantify why we have to do it. How much money do I get back from the marketing dollar I have invested?
Answering that question isn’t straightforward, but it is not impossible either.
ROI comes in the form of more leads, more sales, increased qualified traffic, and other measurable outcomes from your online presence.
I have talked to many clients recently, and some of them are losing sight of the big picture. They only focus on followers’ growth or getting a better reach.
It is fine, but the end goal, at least for companies, is TO SELL MORE.
Marketing serves Sales.
More sales (it means selling more products, more services, or even convincing more people that your ideas are more helpful when you are a politician) are the reason why we do marketing.
That’s also one of the reasons why I push our clients to focus on their Engagement Rate.
The Engagement Rate is an ongoing conversation with your prospects and your clients.
In other words, it is the living proof of the relationship you have built with your community, and it tells you how healthy is that relationship.
Getting your message out there with a low Engagement Rate means 1/ you don’t reach your target audience, or even worse, 2/ you reach your target audience, and they don’t care.
When your Engagement Rate is decent, it means that you reach people for real (the difference between “hearing” and “listening”), and that your message creates a reaction.
So how do you convert the Engagement Rate into sales or leads?
There’re millions of ways to do that. You have to be creative.
Let me give you one easy tactic you can put at work in 30 minutes if you are selling products online.
It might do not work in your specific case, but it will probably inspire you if you adapt it to your situation.
Facebook and Instagram Ads are very powerful when you target them correctly. It’s all about bringing the attention of the right people to the right message.
1/ Grow the Engagement Rate on your Instagram account by keeping the conversation going as much as possible. You want people who interact with you to know why they do it (they like your content, your culture, your values, your products…). That last part is essential: the Engagement you get has to be meaningful.
2/ Then, create an Audience in your Facebook Ads Manager, with the people who have engaged with you on Instagram. It’s straightforward, and you will be guided from the beginning to the end.
3/ If the size of that audience is decent (you can do it with 100 people but the larger, the better), ask Facebook to create a Look-A-Like audience by analyzing the profile of the people who engaged with you and searching for very similar people.
The Facebook algorithm is almighty. It takes into account their demographics, and also their interests, their financials, the size of their families, the websites they have visited, and thousands of other criteria.
Facebook will probably find 1M+ people by extrapolating from your small sample. It’s far enough to sell a few products, right?
4/ Then, you just have to set up a campaign with a nice discount for their first order (that’s your client acquisition cost) or a special offer and run it against the Look-A-Like audience that you have just created.
If your copy and your offer are right, you should get outstanding results with such a sharp targeting.
Growing the Engagement Rate of your Instagram account, to end up targeting your ads ideally to generate more sales was worth the effort, especially knowing that Facebook learns from your campaigns and optimize them automatically, making them even better.
Back to the original question:
How to calculate the ROI of Social Media efforts?
In that specific case, the formula is:
Revenues from your Ads – (Cost of growing your reach and Engagement on Instagram + Cost of the Ads) = ROI
I understand I took an easy case, and I know that 90% of real situations are more complex. I also know there’s some value in building Brand Awareness that I have not taken into account in that formula.
However, I believe you can end up having a rough idea of the worth of your efforts by keeping in mind the big picture and trying to focus more on your real intention: Leads, Sales, and actual opportunities.
You don’t do Social Media Marketing for the sake of it. You do it to take your business to the next level.
As usual, feel free to get back to me with questions and comments!