What is Social Media ROI and How do You Measure It?

As a social media manager, you might struggle to showcase the ROI, especially when organic efforts don't have direct attribution or when paid campaigns don't lead to immediate sales. And the truth is, without clear results, you can't secure budgets or optimize strategies.

But here's good news, you can turn engagement into measurable success by focusing on meaningful metrics that align with business goals like lead generation, customer retention and revenue. The article will explore what social media ROI is, why it matters, and how to evaluate it.

What is social media ROI?

Social media return on investment (ROI) is the outcome you generate through your social media marketing efforts. Be it increased brand visibility, higher customer engagement or even elevated sales. In simple terms, ROI on social media is the return a brand gets from the time, money and effort invested in social media marketing.

Social media ROI calculator formula

In most cases, social media marketing encapsulates areas like brand awareness, customer engagement, customer retention, and customer acquisition. These areas are not that easy to measure in terms of direct monetary gain. As a result, marketers often rely on other social media KPIs and assign monetary value to these parameters to accurately calculate 'Return from Social Media’ or social media marketing ROI.

Social media ROI calculator formula can be expressed as follows:

Social Media ROI (%) = (Return from social media - Cost of social media marketing) / Cost of social media marketing * 100%

While the social media ROI formula is a good starting point, keep in mind that it requires careful assessment of both direct and indirect returns from your social media activities for an accurate estimation of ROI.

Keep reading to find out why social media ROI is important, how you can measure it, and most importantly, how you can improve it.

Download the study: How Sprinklr social delivered 237% ROI in 3 years.

Why measuring ROI of social media is so important

Social media ROI is crucial for several reasons. Here are a few key reasons why you should focus on measuring social media ROI

● Performance insights: It helps you understand what's working and what's not. Look at LEGO's Instagram strategy; it continually experiments with different types of content and measures their performance. It posts a wide range of creative content on Instagram, with two focus areas — inspiring parents and educating and entertaining youngsters. They keep iterating based on the insights gathered from each post. This helps them fine-tune their approach, creating more of what works and less of what doesn't.

● Budget allocation: Tracking social media ROI can help you determine where to spend your money. Glossier, the cosmetics giant, found that it community-driven approach was successful on Instagram, which led it to allocate more budget toward that platform.

● Value proposition: It showcases the value of your social media efforts to stakeholders. Let's take the example of Airbnb. Its well-defined user-generated content strategy on social media platforms significantly boosts its brand image and fosters customer trust. By demonstrating the ROI earned from such strategies, it can easily prove the value of these efforts to its stakeholders.

How to measure your social media ROI

Let’s look at some success metrics to measure the ROI of social media:

1. Customer lifetime value attribution from social media

Rather than focusing on one-time conversions, CLV measures the long-term revenue generated from social media-acquired customers. This helps enterprises gauge whether social media investments are attracting high-value customers or just driving short-term engagement.

How to Measure:

● Track social media-driven customer journeys using UTM (Urchin Tracking Module) tracking, CRM data, and analytics tools.

● Analyze repeat purchases, average order value (AOV), and retention rates of customers acquired via social media.

● Use predictive analytics to forecast CLV based on past engagement and transaction history.

2. Social sentiment analysis and brand perception

Social sentiment analysis translates users' social behaviour into actionable business data. It gives an idea about your customer's conversations and shows if your brand is getting positive or negative attention. Hence, allowing you to tailor your marketing strategies, improve customer service and make better business decisions.

How to conduct:

● Leverage social listening tools to find trending hashtags, mentions, trending topics globally, along with deeper customized insights about your brand, even if your brand isn't directly tagged.

● Separate positive mentions from negative by categorizing sentiment related terms.

Ex, if you're a tech brand

➕Positive terms: seamless, reliable, feature rich.

➖Negative terms: big, crash, slow, outdated.

● Apply social sentiment analytics to spot shifts in market sentiment, pinpoint when and how to engage with customers, and encounter potential problems before they escalate.

3. Share of voice vs share of engagement

Social media SOV tracks how much your brand is mentioned, advertised, or discussed compared to others in your industry. On the other hand, SOE tracks meaningful consumer interactions with brands, while also measuring interest, intent, and action rather than just exposure.

That makes SOE emerge as a more relevant metric than SOV.

Therefore, to shift from SOV to SOE.

● Prioritize deeper engagement metrics such as interaction rates, sentiment analysis, click-through rate, conversion rates.

● Bring together departments (marketing, sales, customer service) to share insights, unify tracking tools, and close the loop.

● Experiment with new content formats, interactive campaigns, and personalized experiences.

● Leverage AI and analytics to refine your engagement strategies dynamically rather than relying on static reports.

4. Dark social impact and attribution

Marketers struggle to track social sharing of content occurring outside of the public eye in the digital landscape. Those sharing activities occurring through private channels like messaging apps, email sharing, private social media DMs, copy-pasting links instead of using share buttons – responsible for 95% of your web traffic.

These sources fail to carry traditional referral data like UTM parameters. That makes it challenging for marketers to track their influence and credit conversions or engagements to the correct source.

As a result, there's:

🤔 Incomplete understanding of customer journey.

🚥 Misattributed traffic (organic or direct instead of social).

↔️ Data gaps

🛃 Misallocation of resources

However, here are some strategies to improve dark social attribution.

● Encourage private sharing with “share via WhatsApp”, “Email”, or “SMS” buttons.

● Use trackable URLs with UTM to trace clicks back to specific campaigns, gaining insights into dark social activity.

● Create private groups or forums to foster engagement, encourage feedback, and drive demand through targeted interaction.

5. Assisted conversion and multi-touch attribution

There can be several social media channels contributing to a user's journey before they convert via a final touchpoint. Assisted conversion recognizes each channel that influences the sales rather than just giving full credit to the final touchpoint before conversion.

At the same time, multi-touch attribution distributes credit among all relevant touchpoints (ex, 40% credit to FB, 60% to Google search) for the same conversion.

How do you track assisted conversions and Multi-touch attribution?

● Utilize Google Analytics 4 (GA4) to get assisted conversion reports to track contribution of different channels to the conversion path.

● Leverage social media analytics tools like Meta (Facebook and Instagram) Attribution Reports for cross-channel contribution.

● LinkedIn and Twitter Analytics for engagement and conversion insights.

Social media ROI success stories

1. Jimmy Choo, a British luxury fashion house, saw an increase in sales by 33% with its interactive social media campaign “Jimmy Choo Trainer Hunt”, a real-time treasure hunt around London using Foursquare, Twitter, and Facebook.

2. Cadbury Wispa’s campaign on Twitter for the Wispa Gold relaunch saw a 25% increase in engagement rate, 116% increase in product mentions, and 41 million Wispa Gold bar sales in 18 weeks. The strategy was to simply tap into pre-existing public interest and conversations about Wispa Gold on Twitter instead of creating new demand.

3. Airbnb #LiveThere Campaign resulted in a 13% increase in bookings and a 20% boost in brand awareness. The campaign encouraged travelers to experience different destinations and share their unique true stories using the hashtag.

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How do you track social media ROI?

There are several tools and methods that can be used to measure social media contribution to your business goals.

🛠️Tools

● Google Analytics helps you track website traffic, conversions, and revenue from your social media.

● Facebook Pixel and link have their native tracking tools that can track your social media ads’ impact on conversions.

✍️Methods

● First, be clear about your goals. What do you want to achieve? Brand awareness, boost engagement, lead generation, or revenue.

● Use UTM parameters to measure which social media efforts drive the most traffic and conversions.

● Monitor key metrics (CTR, conversions, Cost Per Lead, Revenue generated) to ensure you optimize social media campaigns, reduce wasted as spend and improve ROI.

Further, here's how to measure social media ROI using Sprinklr.

Step 1: Set up

● Log in to Sprinklr > Go to the Unified Analytics dashboard.

● Setting > Social accounts (Connect social media accounts).

● Integrate Google Analytics and CRM.

Step 2: Define Social Media goals

● Create a new campaign in the campaign manager.

● Set objectives (lead generation, engagement, sales).

● Define KPIs

• ✅ CTR
• ✅ Conversion rate
• ✅ Revenue generated from social media

Step 3: Use Sprinklr's ROI measurement features

● Social listening to monitor brand mentions and sentiments.

● Engagement analytics to track interactions, shares, and comments.

● Conversion tracker to map activity to website conversions using UTM parameters and tracking Pixels.

● Ad performance insights to measure and spend vs revenue for paid campaigns.

Step 4: Generate ROI reports

● Go to Reporting & Insights>Customer Dashboard.

● Create a Dashboard and select key KPIs

● Use AI Insights to analyze trends and optimize campaigns.

● Export Reports.

Know your social media ROI

To measure the effectiveness of your marketing efforts, you must know your social media ROI. It helps you understand whether your social media campaigns are generating revenue or simply consuming resources.

For instance,

Let's say you run a paid social media campaign for your new service. Their key metrics:

● Ad spend: $10,000

● Social media management cost (tools, agency, etc): $5000

● Total investment: $15,000

● Revenue generated from campaign: $30,000

Now, using the standard social media ROI formula,

ROI (%) = (Revenue from Social Media - Cost of Social Media investment)/(Cost of Social Media Investment)*100

ROI (%) = (3,00,00-150,00)/1,50,00)*100

ROI (%) = (1,50,00)/1,50,00)*100

ROI (%) =100%

Therefore, your company’s ROI is 100%. Meaning, for every $1 spent, you earned $1 in return.

However, as simple as it looks, calculating the social media ROI in the real world can be a lot more complex. Various factors play a crucial role here, including:

● CVL.

● Brand Awareness and Engagement.

● Organic Vs Paid Conversions.

● Sentiment Analysis and Customer Loyalty.

Hence, leveraging more precise, and comprehensive ROI measurement tools becomes crucial. Sprinklr makes things a lot easier here. It helps track Customer engagement, attribution, multi-touch conversions while ensuring your business gets a data-driven understanding of social media performance.

Final thoughts

Measuring social media ROI is not just about tracking numbers – it’s about understanding how your efforts drive real business growth. And you can get the picture of the impact by leveraging various key metrics like CLV, sentiment analysis, multi touch attribution, and more. For that, it’s crucial that you focus on continuous monitoring, optimization, and incorporate the right tools to maximize returns and ensure that your strategy evolves with changing customer behaviours.

Take a smarter approach with Sprinklr’s advanced analytics, real-time insights, and AI-driven reporting to get a simplified ROI tracking and make data-driven decisions with ease. Book a personalized Sprinklr demo today and take guesswork out of your social media strategy.