The article below was a Chapter I authored featured in the book titled "The Experts Guide to Social Media Marketing: Leverage the power of social media", published by Mithra Publishing 2013.

Social Media has become very much the ‘in’ thing for businesses these days, and rightly so.

Considering the sheer number of people who use Social Media on a daily basis, businesses are naturally attracted to the potential of attracting attention to their brand in order to capitalise on the hype.

“Social Media is like sex. Everyone wants to do it. No one actually knows how. When finally done, there is surprise it’s not better” – Avinash Kaushik

But why?

The funny thing is, businesses jump into Social Media blindly and end up confused and bewildered by the complexities, and many theories, about what Social Media ROI is and how to measure it.

The aim of this article is to provide some insight and answers to these very questions and will cover the following topics:

  • Definitions
  • Objectives
  • Philosophy
  • How to Measure Social Media ROI
  • Generating Revenue
  • Reducing Expenses
  • Generating Awareness
  • 5 Steps to Maximising Social Media ROI
  • Conclusion


Let’s start with some definitions:

Social Media:

Social Media refers to the means of interactions among people in which they create, share, and exchange information and ideas in virtual communities and networks.” – Wikipedia

Return on Investment (ROI):

Return on investment (ROI) is the concept of an investment of some resource yielding a benefit to the investor.” – Wikipedia

In other words, if you invest X, the return on investment is what you get back. X could be a singular value, such as money or time, or a collection of things, such as money and time.

In mathematical terms:

Return on investment = (gain from investment – cost of investment) / cost of investment

This measurement can also be shown as a percentage rather than a monetary $ figure. For example, if gains of $5,000 were made on an investment of $10,000, then the ROI would be 50% (5,000/10,000 x 100). Click here for further reading on calculating ROI.

Social Media ROI:

Here lies the golden question and an area of much debate. To simplify what many others tend to over complicate, I would define Social Media as:

“Social Media ROI is the investment of time and money into virtual communities and networks to yield a benefit to the investor.”

There are a few interesting parts of this definition that should be explored further:

Time and money: It goes without saying that in business, time is money. So, you need to first consider what your investment of time and money is going to be before jumping into Social Media. Lack of time is also one of the primary challenges that businesses face when engaging in Social Media.

Virtual communities and networks: When most people say ‘Social Media’ they immediately think of Facebook, Twitter and all the other mainstream communities. Social Media also includes blogs, forums, chat rooms, and any other online hub where people create, share and exchange information and ideas. To get an idea of how vast the Social Media landscape is, take a look at the Conversation Prism, developed by Brian Solis, which is an ongoing study in digital ethnography that tracks dominant and promising social networks and organises them by how they’re used in everyday life. This again highlights the importance of what network your business should be a part of, because if time and money is limited, then you need to choose where to invest to get the greatest return – whatever network that may be.



When a business makes the decision to embark on being present in Social Media; whether it be Facebook, Twitter, Google+, LinkedIn, etc, there has to be an underlying goal for why they are doing so. ‘Doing it’ because every other kid in school is doing it just doesn’t cut it.

On many occasions I’ve heard business owners say something along the lines of, “Oh yeah, we want to do Social Media. We want a Facebook page, Twitter account and a Google Plus. Meanwhile, they don’t actually understand what they’ve just said.

My first response is typically, “Why, and what is your objective?”. But in addition to this, I also help explain that Social Media Marketing (SMM) is quite often looked at as a siloed channel, which is a fundamentally flawed belief. Social Media is a part of the marketing mix. So, when asking what the objectives are, the questions are actually expanded to “Why does your business exist?” (big question!), “What are you overall sales, marketing and customer relationship management objectives?” and then “How can Social Media help you achieve those overarching objectives?”.

As a business, if you cannot define your overall marketing objectives and justify the reasons to invest in Social Media, it’s best you stop now and rethink your strategy. Unfortunately, many businesses and Marketers focus too much attention on metrics such as Likes, Followers, Comments, Retweets, and even Klout. These metrics are aligned with measuring engagement, which is fine, but have little proven correlation to the bottom-line. The hard part is understanding how much is a Like or a Comment ‘worth’ to your business. If you can’t answer that (and it’s difficult to accurately do so) then it’s best to focus your efforts on other objectives.

Here are some common objectives when it comes to Social Media:

  • Generate leads or sales
  • Reduce customer service costs
  • Drive traffic to website
  • Identify and address brand fans
  • Drive opt-in to more targeted messaging
  • Upholding brand reputation
  • Amass total followers – build a tribe
  • Customer service channel
  • Increase reach of the brand / product
  • Increase and manage brand vibrancy / sentiment
  • Improve the product / service by providing a place where customers can give feedback

Ultimately, the fundamentals of a business is to make a profit, or make a difference; or both. To succeed, these fundamentals require the business to be efficient with money and time spent, otherwise known as ROI. If we focus on profit, that can be measured by either generating revenue (i.e. generate leads or sales) or reducing costs from the revenue you generate (i.e. reduce customer service costs) – all while upholding your brand reputation. So, this should form a large part of the overall objective of why your business should be involved in Social Media in the first place.

In light of recognising that Social Media is only a part of the overall marketing mix, it’s important to recognise the correlation to what’s being explained as ‘Social Media’ versus how a business achieves its overall objectives.


Let’s look at the classic example of Apple Inc., and more specifically, Apple Retail Stores. There has been a myth that Apple doesn’t listen to its customers and despite all the hype from lovers and haters about Apple on Social Media, you will notice that Apple do not actually have an engaging presence on Facebook and never interact with their followers on Twitter. This is strange, right? It goes against what most other businesses are doing, and yet, Apple are one of the most successful companies in the world.

Maybe it simply comes down to Apple’s interpretation of what Social Media is. They, as mentioned earlier, see Social Media beyond the communities of Facebook and Twitter. Apple Retail Stores embrace their own virtual community by closing the loop on customers who express dissatisfaction post-purchase, or as Apple like to call them ‘detractors’.

Apple’s ultimate goal is to “delight the customers”. This is a very much “why they exist” and it explains what the brand stands for and why customers should like the brand. To inspire you, legendary author and motivational speaker, Simon Sinek, made this striking quote:

“People don’t buy what you do, they buy why you do it”.

This quote should make you rethink the standard business priority of making revenue to generate a profit, and more about how a positive experience with your brand impact revenue. In other words, this is a good time to reflect on the earlier question, “Why does your business exist?”.

So, how does Apple and its Retail Stores measure their goal? Well, just like most big brands, Apple uses a Net Promoter Score (NPS), which is a management tool that can be used to gauge the loyalty of a company’s customer relationships on a scale of -100 to +100. Normally, a brand calculates this on a quarterly or annual basis, but Apple Retail monitors NPS daily across over 300 stores! Not surprisingly, Apple Retail has the highest NPS score of any sector (some stores have an NPS of 90%!).

Their belief is that delighted customers will tell their friends and colleagues about their wonderful experience at the store. To manage the process, when customers leave comments about their purchase experience, the ‘detractors’ are contacted within 24 hours to close the feedback loop. Coaching and feedback messages are passed along to the employees on the shop floor, and finally, the employees who create ‘promoters’ are recognised and praised by Managers.

Studies from this process proved that every hour spent calling detractors was generating more than $1,000 in revenue or additional sales of $25 million in the first year, which was a really good return on the investment (Source: Steve Denning, Forbes).

In traditional management, where profits are hero and customers are secondary, the expense of following up with customers would seem like the first expense to cut. But when you consider a typical electronics store averages $1,200 per square foot in sales, mature Apple stores exceed $6,000 per square foot—the highest productivity in retailing of any kind.

But what does Apple Retail and NPS have to do with Social Media? The point is that Social Media is the perfect avenue for Customer Service to:

  1. Close feedback loops on detractors;
  2. Praise the promoters;
  3. Be transparent during the whole process;
  4. Improve brand reputation (or NPS), and
  5. Indirectly influence revenue generation.

How to Measure Social Media ROI

The topic of how to measure Social Media ROI always seems like a challenging question for Digital Strategists, Marketers and “Social Media Gurus” to answer. And to be quite honest, it still is a fairly new medium that many are still coming to grips with. But, in a lot of other ways, I see the answer as quite a simple one. We’ve already established that fostering customer relationships is critical for business success and brand reputation, but if you think about what the core objective and definition of a business is, it’s this:

“The purchase and sale of goods in an attempt to make a profit.” –

Now, how do you make profit?

Revenue – Expenses =   Profit %


It sounds really simple, doesn’t it? So, when you relate it back to Social Media ROI, there are two main things that will define what your monetary return will be:

1.    Generate revenue from a social channel
2.    Reduce expenses of your business to increase the profit margin

It should be mentioned at this point that the above defines ROI if the immediate goal is monetary. The third main area that can indirectly drive revenue is:

3.    Generate awareness from a social channel

This could apply for your business as a secondary goal and could also be the immediate goal for some other organisations, such as Not For Profits, Charities and Governments (think anti-smoking and responsible drinking campaigns).

If all of the above makes sense, then let’s move on to some of the ways Social Media ROI can be measured.

Generating Revenue

Money may not grow on trees, but it certainly can be extracted from Social Media. In the case of Marketo, they were able to cash in on a $17,000 deal from one simple tweet. Of course, this doesn’t happen every day, but it’s nice to know that it’s possible. They achieved this incredible result through sharing a link to download piece of thought leadership content, which required the lead to fill out their details to download it. Upon downloading it, they were entered into an email nurturing campaign, and within 3 weeks the prospect bought the product.

Looking at a smaller scale example, Vamplets, who market and distribute baby vampire dolls, began investing $250 per month on Facebook ads, which directed straight to the website. Through link and conversion tracking using Google Analytics, they have been achieving $1,000 of revenue per month from Facebook. This result equates to 300% ROI.

Reducing Expenses

The second part of the profit equation is Expenses, which are what defines the investment in your ability to generate revenue. Social Media can be a great opportunity for your business to venture into as an avenue to reduce expenses. In the case of marketing automation provider, InfusionSoft, they decided to use social technologies to better inform their customers and keep them up to date. Previously, they would have assigned one customer service agent to 72 customers. However, with the introduction of Social Media this was reduced to 1 agent per 172 customers. They found that the communities they nurtured would begin to answer each other’s queries regarding product questions etc. This cost saving means that InfusionSoft is now able to invest that money into other areas of the business, or in further optimising their Social Media investment.

Generating awareness

Generating awareness is a tough one to measure and when tied to sales, it’s success can easily be assumed. This is not to say it’s wrong, but there are limitations with measuring awareness. Let’s take one of the most successful Social Media campaigns to date: Old Spice. Their campaign included a clever YouTube video commercial, along with sending personalised video messages to social media fans and celebrities. The reach of the Old Spice campaign was huge, and as a result, it was claimed that sales increased by 27% year on year. Tieing the success a bit closer, in the 3 months after the height of the campaign, sales were up by 55%. There’s no doubt that Social Media drove awareness, but only the assumption can be made to say that sales were generated directly due to the Social Media campaign.

In another example, Subway’s objective of the Subway Slim Down Challenge was to use Social Media to raise awareness. They launched a social competition on their Facebook page and recognising that this campaign was only one part of a full marketing strategy that was active, they found 71% of site traffic that drove to the registration page was from Facebook.

5 Steps to Maximising Social Media ROI

1. Using technology to your advantage

To fully leverage your investment and understand how revenue is being generated from Social Media, businesses should take advantage of the platforms and technologies available to them, such as:

  • Customer Relationship Management (CRM) system to manage your customer data and report on pipeline and revenue (e.g. Salesforce)
  • Marketing automation platform (connected with a CRM) to track customer engagement, execute email nurturing and social marketing campaigns, automate data management practices and measure pipeline and revenue (e.g. Marketo).
  • Web Analytics tool to track and measure detailed statistics about a website’s traffic and traffic sources and measures conversions and sales (e.g. Google Analytics).

2. Benchmarking success

Like any marketing initiative you decide to run, benchmarking the success will be critical to understand how your marketing compares to other organisations and whether your results are good or bad. If you haven’t run the campaign before, then use the campaign objectives you set out with as your benchmarks, and then assess the results to determine how you can improve on them next time.

Benchmarking examples:

  • Response time to customers
  • Customer satisfaction
  • Problem resolution
  • Reach of marketing
  • Engagement
  • Sales

By benchmarking your success, it can influence change by:

  • Identifying where gaps are in the current process or performance
  • Highlights where opportunities lie
  • Identifies what is successful, which could help leverage the success of other campaign initiatives
  • Creates organisational best practices, through testing variables in campaigns to optimise success and recording what the benchmarks are

3. Track your social channels by lead source

As marketing becomes more sophisticated and complex with multiple channels and sources, marketers need to become more savvy in understanding what channels are most effective in driving revenue. So, it’s critical that when you execute multi-channel lead generation programs and campaigns, you must track your leads from the source they came from. For example, a sale of a product where the source of generating that lead was from a social channel, like Facebook or Twitter.

4. Measure the social touch points along your sales funnel

Going beyond the lead source, the next important step is to track specific touch points so that you know which ones impact your sales funnel the most. Also be mindful not to group all of your social metrics into one indication of success. Break them down into the campaigns they interactions were associated with and understand what social strategy works best for you. This is otherwise known as Campaign Influence and can be tracked through:

  • Facebook engagement
  • LinkedIn engagement
  • Twitter interactions
  • Google+ plus engagement, etc.

5. Put the right nurturing tracks in place

Just because someone walks into your store doesn’t mean they are always ready to buy. The same thing applies to the leads you generate through social channels. These leads usually need to be nurtured, so when the time comes and the lead is ready to become a customer, your brand is top-of-mind and the preferred choice.

Nurturing your leads will guide them through the funnel until they are ready to purchase. As an example, if a potential customer shows interest to your brand on Twitter, such as replying to, re-tweeting or favouriting one of your tweets, the first step is to build the relationship by acknowledging the effort and providing a response. The next step is to provide (and direct them to) personal, consistent and quality content that is relevant to their interests.

6. Consider a multi-touch attribution model

When using a single-touch attribution model, the campaign that sources a customer will get full credit to the eventual sale, regardless of how the customer gets there. The trouble is, this doesn’t paint the true picture of what influenced the customer to make a purchase decision.

On the other hand, by using a multi-touch attribution model, the eventual sale gives credit to all the marketing channels that influence your customer during their awareness, education and consideration stages of the buying cycle. Plus, since Social Media is only one part of the marketing mix, knowing how other touch points along the sales cycle influence your prospects will provide insight into understanding how you can accelerate and optimise the entire process. There are many tools out there that measure multi-touch attribution, such as Marketo and even Google Analytics. Here’s a useful article to learn more about the topic.


The concept of Social Media and how to make it profitable to your business will always be somewhat unique, and it’s certainly not a one-size-fits all marketing tool. But, the concepts outlined above have been written to help any business understand the basics of the subject.

There are many questions about the key to Social Media ROI, but the prime recommendation here is to starting with asking yourself what your objective is and what does your brand stand for? What makes people want to: buy your product?; your service?; tell other people about it?; help you make your product better? It’s the mantra of a business.

ROI itself can have multiple meanings, which has quite possibly lead to the confusion about any true meaning, but consider the philosophy of what Social Media is and key elements of the equation: improving NPS and customer satisfaction, generating revenue, reducing expenses and generating awareness.

As you define what Social Media ROI means to your business, leverage the tools and technology available and start benchmarking against what you have done before, but also against other methods (e.g. Call Centre costs vs Twitter response).

Ultimately, what you need to think about is, if you take Social Media out of the equation, where does that leave you? Remember, Social Media is only one part of the mix, but it is what makes it all transparent.


Greg BeazleyGreg Beazley is a Senior Consultant at Datarati, a world leader in marketing automation and revenue performance management. He is a passionate online marketer, digital strategist and wanna be entrepreneur who loves surfing, drumming, philanthropy and anything techie. Fascinated by psychology, marketing and what motivates people. His blog is dedicated to all of the above.




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