5 Simple Steps to Determine ROI via Social Media


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Return of Investment (ROI) comes as a surprising development to most business people who are new to social media. That’s because the results are often astounding. This is particularly applicable to those business CEOs, Managers and Marketers that implement best practices effectively. To appreciate the importance of social media and its influence on ROI there in need to understand what ROI means.

What is ROI?

Return of Investment is a means to measure the efficiency of investments. It can be a single investment or multiple investments. To calculate it, divide the return (profit) from the investment by the cost of investment. The ratio obtained can be expressed as a percentage for best practice purposes.

Therefore, if an investment has a negative ROI it is an indicator that investors should not undertake the investment. Similarly, if other investments have a higher ROI, those should be favored over one with less ROI.

It is a best practice for business people to remember that the definition and method of calculating ROI can change. This depends on the circumstances and form of business it is implemented in. However, there is a major con of the flexibility with ROI calculations methods. That is, the result can be expressed in many ways. Therefore there is need for extreme precision in the use of inputs. One must understand what metrics are being used in best practices.

Therefore, Social Media ROI will be calculated as:

ROI on Social Media

Here are five steps to know the actual ROI businesses earn on social media with best practices:

  1. Evaluate Expenditure on Social Media: This involves determination of cost incurred on hardware and software. Of course, access to social media is via the internet that is not absolutely free.
  2. Evaluate Customer Lifetime Value (CLV): Most company owners ignore this best practice without realizing how important it is. Having this knowledge helps one to make better decisions knowing what keeps customers engaged with the business.
  3. Find Out How Many New Customers Social Media Provides: This requires you to track conversions and use Google Analytics and other applications available. Although this is a time consuming process, it is a required best practice that cannot be ignored.
  4. Establish Impression Value (IV): To know how well your brand is known on social media, there is a simple calculation involved. Obtain the number of impressions visitors have made on your social media page. Add the impressions on every social media network you are on (Twitter, Facebook, LinkedIn, YouTube etc). The formula is as follows:
  5. Evaluate the Customer Service Value: Using social media reduces cost of customer service. No matter how little it may be; it accounts for something. Once you have evaluated the cost use the following formula:

These are the best practices required for determination of RIO via Social media. They are recommended for every kind of business on social media.

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