Traditionally, marketing ROI (Return on Investment) has been measured through this calculation:
ROI (%) = (Net Profit/Marketing Costs) x 100
However, this measurement tool cannot effectively measure social media activities. By 2013 only 9% of marketers use it. It is known that social media marketing is measured best through audience reach, engagement and sentiment (Price, 2013).
According to Natalie Burg, using metric tools, interactions and analyzing traffic help gauge what your small business is getting out of its social media commitment. A metric tool such as “conversion measurement” allows anyone who advertises on the Facebook platform to record behavior of those who click on ads.
There are three ways Facebook conversion measurement can improve your company’s ad strategy. First, track by mobile-to-desktop and desktop-to-mobile is the only way to track cross-platform conversion on Facebook. It is an asset to your mobile marketing efforts because users can access Facebook on their mobile devices. Therefore, you can see if anyone views your mobile-only ads when they sign-up or register.
Second, reduce your cost per conversion and create more targeted ad campaigns by using the conversion measurement and OCPM (Optimized Cost per Mille). If you set up an advertisement, Facebook will automatically optimize it to reach people who have responded positively to that type of ad before. This allows you to track which ads helped convert users into which kinds of customers, new leads or new buyers. This reduces your cost per customers or new lead dramatically. For instance, “Facebook cites the Democratic Governors Association, which used the tool OCPM to track mailing list signups and gathered signups at a more affordable rate than with previous campaigns. Specifically, it paid 85 percent less per each signup they collected” (Porterfield, 2013).
Third, cut ad spending that doesn’t drive high-value user action by applying the conversion measurement to a split-test approach, which is running multiple ads at the same time to measure the results to see which ones convert better. It allows you to see which ads are driving the actions you most want your potential customers to take. Therefore, when the data shows a particular ad is collecting leads at a rate and price per lead you are satisfied with, you can more confidently continue to direct ad dollars to that specific ad campaign.
The return is not on the investment in online social networking it’s the return on interactions because you put in interactions to get more interactions, you don’t put in money to get more money. Therefore the returns come from the development of relationships, trust and loyalty of people; they then become potential customers and advocates for your business. “The investment in interactions results in an increased number of email newsletter subscriptions, Twitter followers, Facebook fans or blog comments. From there you can typically track an increase in the number of product orders, new clients, or referrals” (Clark).
Analyzing traffic can be done with a website analytic such as Facebook, Google or Twitter. It tells you how often people find your page. For instance, Twitter has its own analytic dashboard that allows you to keep track of your timeline activity such as tweets that were re-tweeted, someone’s favorite or replied to. It also tracks the number of mentions, new followers and newly followed. Therefore, when you look at the average cost of those campaigns per person then analyze that cost against how many visitors you get from free social media placements. You can then put a dollar sign on the traffic derived from twitter links (Burg, 2013).