What is the ROI of Social Media? Part II

@Kevin | Strategy

(This ended up being a really long post, I split it into two parts. You can read Part I here.)

Tracking Goals

Now that we have goals that we think can be measured we have to work out how we are going to do that. This is another step where you need to stop and think before diving in. What type of metrics do you have access to, what type of data does your business generate, and what tools are out there that you can use? In our case we have a simple analytics program that interfaces with our PPC campaigns, our internal sales numbers that we can see the source of how the customer signed up, how much they spent, how often they sign in and if they invited people at our disposable. We added ways to track traffic through individual links by using URL shortening services that offer analytics. If we want to we can determine the value of individual tweets, posts, and links. Also the factor of my time, which I have to track on my own using a separate tool.

For the five incoming streams of traffic from our marketing program I have created a different URL that they enter the site with. Some are landing pages and some are invite codes, it all depends on the source of the traffic. Because each of these sources has different URLs we can break up the incoming traffic into different groups. Beyond the five sources of our traffic we can create invite codes for contests, special events, and numerous other ideas, we are really only limited by our imagination.

For example lets look at Twitter. When people ask to be invited to the site because they found our Twitter page (or we added them as a friend) we send them an invite code with a custom URL. If we tweet an invite code out we use the same URL, we call it the Twitter invite code. (Note: If we wanted to break it down further we could break these into their own URLs, for discussion’s sake we are saying they are the same.) Our analytics program measures the Twitter invite code, this will tell us the traffic that we have received (click thru rate for members) from it and the amount of people who signed up (conversion rate for members). The great thing about this invite code is when we tweet it we see people sharing it or clicking thru and signing up even though they didn’t ask to join.

We have all of our traffic data and general signup data now we need to know our sales data and scratch a bit more underneath the surface of our member’s data. At the end of the month we go into our system and see the amount of people signed into the site after signing up, the total amount they spent (conversion rate for sales), the people that they invited, and how much they spent. We then marry the two groups of data together to analyze them for each of our five marketing planks. (We are starting to use the eCommerce setup in Google Analytics to but haven’t had it running very long, hopefully this makes us more efficient with our measurement.)

Are there flaws to this? Yes. While we can measure what person A did and they people they invited. (Person B) Data gets messy and complex beyond that. If person B invited person C, D, E and then they invite people the data begins to get a bit blurry. Currently we can’t map that effectively. (This will evolve as the company grows… hopefully.) So the numbers we are analyzing stop at a certain level but there is more than enough data here to determine the effectiveness of what we are doing with our marketing campaigns.

What can we track? What is the ROI?

With all of this data there is so much we can measure. We can examine click thru rate and conversion rate of every piece of content we put out there through our marketing program. This can tell us information like what content is the most effective, what platform is the most effective, or even when is the best time for us to post our content. Through these numbers we can determine the effectiveness of our campaigns and assign some value to the engagement we have with our members.

Also we can check our return on investment for specific channels.

A very basic ROI formula reads like this: Net profit / total investment × 100 = Return on Investment (You could always go with the DuPont forumla but we are trying to keep this basic.)

Using the Twitter example again we can learn through our system the net profit of sales based off of people signing up through Twitter and the people they invite. For our total investment I have tracked my time and can divide that into what I was getting paid per month. Multiply that by 100 and we have a very simple ROI for Twitter usage for this client. We can apply this to all our social media outposts, blogger outreach, and our PPC campaign (of course we have to add in the cost of the ads for the PPC campaign).

Now this is a very basic model. Let’s say though we want to break down our Twitter usage further. We can give a different tracking number to link we tweet, we can see how often it is retweeted and shared via the URL service and see what the conversion rate and click thru rate is for that specific URL.

Also we can monitor our brand and see people sharing their own invites via Twitter. We can then take their name and check it against our system to see the click thru rate and conversion rate for their invites and make an adjusted return on investment for Twitter as whole. Expand the idea of monitoring past that, we can see the value of different message boards, blogs, and find new people to establish relationships with. We need to be aware of where we are being mentioned and figure out how to evaluate the data to determine the values of these communities.

When we break down all of our usage on these platforms we can see what has been effective, where we are gaining traction, and what is giving us the most for our investment. A large portion of our social media campaign now has a basic idea of our return on investment. It isn’t perfect but it gives us an idea on what efforts are effective, where we should spend our time, and how we should tweak our strategy. We aren’t even factoring in branding and some of the “immeasurable” impacts of a social media campaign.

I hope this gives you a very basic and elementary look at the thought process of tracking ROI for a campaign. Like I said at the start of this your business, your goals, and what you can track will vary but creatively looking at a situation, the data available, and establishing goals you can track will allow you to create your own procedure for tracking the ROI of your social media campaign.