🧰 How to Measure ROI of Social Media Campaigns
Including which KPIs to measure and examples for hospitality brands
TLDR:
Social Media Return on Investment (ROI) measures the revenue generated from social media marketing efforts relative to the costs of those efforts.
To calculate social media ROI, businesses need to determine their expenses, including advertising, content creation, and management tools.
They then need to track their social media revenue, which can come from increased brand awareness, website traffic, and sales.
The formula for calculating ROI is: (Return - Investment) / Investment X 100
A positive ROI means that the business earned more from its social media efforts than it spent, while a negative ROI means it spent more than it earned.
Contents:
What is Social Media ROI?
Why Do You Need to Measure Social Media ROI?
How To Calculate Social Media ROI
How To Improve Your Social Media ROI
How To Set New Goals & Track Progress
Social Media ROI FAQs
Introduction
It was a bustling Friday night at Luigi's Trattoria, the city's oldest Italian restaurant. The aroma of fresh pasta and simmering tomato sauce filled the air.
But something was off. Despite the restaurant's popularity over the years, tables remained unoccupied for longer than usual, with regular customers decreasing.
Luigi, the owner, felt a knot in his stomach.
The social media campaigns he was running weren't converting into customers.
Was he reaching the right audience? Or was his messaging off?
He was at a loss, unsure how to measure his social media investment return.
Across town stands the charming Rosewood Hotel, nestled between towering skyscrapers. It had all the ingredients for success - unique decor, personal service, and a prime location.
But despite their best efforts, they struggled to compete with the larger, more renowned hotels. The owner had invested heavily in their social media strategy, but the occupancy rate was still disappointing. The pictures were beautiful, the content engaging (or so they thought), but were they targeting the right audience? And, crucially, was their social media investment actually paying off?
In both cases, calculating the social media ROI could have made all the difference - helping both venues save time and money, boosting brand impact and gaining a competitive advantage.
By understanding and applying Social Media ROI, you, too, can gain a competitive edge.
This guide will show you what Social Media ROI is, why it's important for your hospitality business, and how you can effectively measure it to ensure your social media investment pays off.
What Is Social Media ROI?
Social media ROI, or return on investment, is the value generated from your social media activities relative to the investment. It is calculated using this formula.
For example, if a Cafe had expenses of £500 on Facebook Ads, which generated £2000 of revenue, then the ROI would be 300%:
£2000-£500 = £1500
£1500 / £500 = 3
3 x 100 = 300%
Measuring the effects of a Social Media marketing campaign isn't always a clear-cut procedure, unlike sales where you have a direct cause and effect – social media marketing requires a more complex understanding and a specifically targeted approach to understanding your data.
Many companies struggle to understand the financial impact that social media has and often find themselves losing money and repeat customers because they don't know how to optimise their efforts.
Some of the most common challenges encountered are:
An inability to tie social media to business outcomes
Lack of analytics, expertise and resources
Inconsistent analytics review
Unreliable data
Focusing on Likes and Followers
Why Do You Need To Measure Your Social Media ROI?
ROI is a tool for making informed decisions, tracking progress, and ensuring your social media marketing efforts align with the business's overall goals.
It provides valuable insights into the effectiveness of your campaigns, allowing a business to understand which initiatives are working and which are not.
Benefits of Calculating ROI
Resource Allocation: A business can determine where to best allocate its resources by calculating ROI. High ROI campaigns deserve more investment, while low ROI campaigns need to be rethought or scrapped. Adopting this approach makes it possible to utilise resources more efficiently and optimise budgets.
Strategy Planning: Knowing the ROI of social media efforts helps formulate future strategies. It provides data-driven insights to guide decisions about which platforms to focus on, what content to produce, and when to post for maximum engagement.
Competitive Advantage: Businesses that measure and act on their social media ROI can gain a competitive edge. They can quickly pivot their strategies based on what's working, staying ahead of competitors who may need to be more nimble.
Customer Engagement: ROI can provide insights into customer engagement. High ROI may indicate that customers are highly engaged with a campaign. In contrast, low ROI may suggest the need for more engaging content or a new approach.
Revenue Generation: By tracking conversions and revenue as key performance metrics, hospitality businesses can understand how much revenue they generate from social media.
Determining Profitability: The ROI calculation can help businesses determine the profitability of their social media campaigns, contributing to the overall profitability of the business.
Customer-Centric Strategy: By understanding customer preferences and behaviour, social media ROI can help businesses construct a more customer-centric strategy that hyper-personalises each campaign.
What ROI Can’t Tell You
While social media ROI is a valuable metric, it doesn't paint the full picture of your social media strategy's effectiveness.
It can't measure intangible benefits like brand awareness or goodwill and may not accurately reflect the long-term value of building relationships with your audience.
It's important to consider other performance metrics in conjunction with ROI to get a comprehensive understanding of the impact of your social media strategy.
Metrics to Measure
“If it can be measured, it can be managed.”
Metrics in marketing are measurements used to evaluate the performance of a campaign. They can range from basic measures such as impressions to more complex indicators such as conversions and click-through rate (CTR).
Metrics provide marketers with data-driven insights into the effectiveness of their campaigns, enabling them to make more informed decisions and optimise their strategies.
Key Performance Indicators
A Key Performance Indicator (KPI) is a metric directly tied to specific objectives. They provide a clear focus and set the direction for your social media strategy.
Your KPIs should reflect your business objectives, whether to increase brand awareness, drive website traffic, generate leads, or boost sales.
You can use the table above as a helpful tool for selecting relevant KPIs for your campaigns.
For example, if your objective is to increase brand awareness, the KPI could be reach or impressions. If your goal is to promote customer loyalty, the KPI could be the number of new sign-ups or form completions.
How to Calculate Social Media ROI
Let’s revisit the formula for calculating ROI
The return is the value generated from your social media efforts, while the investment includes your time, tools, and advertising costs.
Calculating the Return
Social media investment returns can be measured differently, depending on your objectives.
Some KPIs are straightforward, such as Sales Revenue and Cost per Conversion.
Let’s check back with Luigi at Trattoria for an example
With tables remaining unoccupied for longer than usual and regular customers decreasing, Luigi knew he had to make a change.
Determined to drive mid-week bookings and takeaway orders through a new social media campaign, he set an ambitious target of 10 new orders per weekday night, split between table bookings and takeaway sales.
Luigi calculated that if each customer spent an average of £20, he could generate £200 in direct revenue per night, giving him an extra £1000 per week.
He decided to invest £500 into his month-long social media campaign, hoping to attract new week-day customers and increase his ROI.
To ensure the campaign's success, Luigi first identified his target audience. He discovered that his ideal customers were young professionals and families living in the surrounding neighbourhoods. Armed with this information, he crafted a messaging strategy to promote the restaurant's rich history, authentic Italian cuisine, and healthy ingredients.
As the month progressed, Luigi's Trattoria witnessed a remarkable turnaround. The restaurant saw an average of 12 new orders per night, surpassing his initial target of 10.
The campaign's impact extended beyond the numbers. Luigi noticed an increase in positive online reviews, word-of-mouth recommendations, and overall brand awareness.
Customers who were initially unfamiliar with the restaurant became regular patrons, bolstering its long-term sustainability.
In terms of ROI, Luigi's investment of £500 proved to be a wise decision.
With an average customer spend of £20, the restaurant generated £240 in additional revenue per week day night. Over the course of the month this generated additional revenue of £4800.
(Calculations are based on 20 week-days)
£4800 - £500 = £4300
£4300/£500 = 8.6
8.6 x 100 = 860%
A remarkable return on his social media campaign investment.
Meanwhile, at Trattoria on Earth 616
Luigi had a slightly different experience; the campaign appeared to be working, and he was generating an extra 6 orders per weekday night. Over the course of the month, this generated additional revenue of £2400.
£2400 - £500 = £1900
£1900/£500 = 3.8
3.8 x 100 = 380%
While Luigi's ROI on Earth 616 is lower than the original scenario, there are still a few reasons for the campaign's performance.
It's possible that the messaging strategy or campaign targeting was not as effective in reaching the desired audience. External factors such as competition or economic conditions could have influenced the results.
And in the Mirror Dimension…
To save time, Luigi did not research his local audience. As a result, Trattoria’s social media campaign underperformed and only generated 1 new order per weeknight.
Over the course of the month this generated additional revenue of £400.
£400 - £500 = £-100
£-100/£500 = -0.2
-0.2 x 100 = -20%
As we can see, the expenditure was larger than the return, resulting in a loss.
Some metrics are a little trickier to quantify; you can determine the value of your social media campaigns by assigning values to these metrics.
Here’s an example at The Rosewood Hotel:
The Rosewood Hotel has launched a new package deal. To promote this, the marketing team created a social media campaign to capture their audience's attention. The hotel's marketing team measures the Reach of this post, counting the number of people who have viewed it.
The hotel's marketing team, having taken advice from a consultant, now understands the significance of each view and assigns a monetary value to each one. The value per view is calculated based on potential increased bookings and enhanced brand visibility.
Using past booking data, they estimate that one in every hundred views translates into a direct booking, and each booking's average value is £200. Each view could theoretically be worth £2.
The team sets a target of 10,000 views, equating to a potential direct revenue of £20,000 (10,000 views x £2 per view), not to mention the indirect revenue from increased brand visibility.
We’ll check back in with them shortly….
Calculate the Investment
To calculate social media ROI accurately, you must consider all the costs associated with your social media activities. These costs may include:
Time: The number of hours spent on managing your social media channels multiplied by the hourly pay rate for your workers.
E.g. if you have an employee who spends 20 hours a week managing your social media channels and earns £20 per hour, then the time cost would be £400 per week.Tools and Services: List the tools and services you use to run your social media channels and calculate their total cost. E.g. you may need a paid-for scheduling tool, a media library, an analytics platform, and an influencer database.
Advertising Costs: Consider the amount you spend on advertising, whether it's through direct ads or pay-per-click campaigns.
For instance, if you run weekly campaigns on Facebook and Instagram, you should factor in the cost of each campaign, including the budget you set and any fees associated with paying for the services.
You can determine your total social media investment by adding up these costs.
Calculate the ROI
Once you have measured the return and calculated the investment, you can use the formula mentioned earlier to determine your social media ROI.
Your social media efforts generate profit if the result is more than 0%.
Anything below 0% indicates a loss.
Let’s Check In Again at The Rosewood
The marketing campaign exceeded expectations, achieving an impressive reach of 15,000 views.
This meant that the potential direct revenue, based on the previously assigned value of £2 per view, was £30,000 (15,000 views x £2 per view).
The hotel's marketing team was thrilled with this outcome. In terms of ROI, the hotel's marketing team had to consider the investment made into the campaign; this included the cost of creating content, paid promotions, and the time invested by the team.
Let's assume the total investment was £5,000.
£30,000 - £5000 = £25,000
£25,000/£5000 = 5
5 x 100 = 500%
However, the team didn't stop at direct revenue. They also analysed the indirect benefits of the campaign, such as increased brand visibility and potential word-of-mouth referrals.
While these are harder to quantify without specialist tools, the team noticed an uptick in website traffic and enquiries about the hotel, suggesting that the campaign had boosted awareness and interest in the hotel and its offerings.
Elsewhere at the Rosewood on Earth 616…
The hotel's social media campaign performance was underwhelming, reaching only 8,000 people.
Based on the previously assigned value of £2 per view, the potential direct revenue would be £16,000
£16,000 - £5000 = £11,000
£11,000/£5000 = 2.2
2.2 x 100 = 220%
The campaign generated less revenue than expected, resulting in a lower ROI. This could indicate that the campaign didn't reach and engage the target audience as effectively as it should have.
The marketing team would need to evaluate the campaign's strategy, content, and targeting to identify areas for improvement and make necessary adjustments for future campaigns.
And in the Mirror Dimension…
Rosewood Hotel’s social media campaign underperforms and only reaches 2000 people.
The potential direct revenue, based on the assigned value of £2 per view, would be £4000
£4,000 - £5000 = £-1000
£-1000/£5000 = -0.2
-0.2 x 100 = -20%
This negative ROI indicates that the campaign did not generate enough revenue to cover the investment made.
The marketing team needs to reevaluate their target audience, messaging, or promotional tactics to improve future campaigns. They should also consider exploring other marketing channels or tactics to maximise their return on investment.
How to Improve Your Social Media ROI
Define Clear Social & Business Objectives
Your social media investment can create value in many ways, such as
Driving bookings and orders
Growing brand awareness
Building a loyal audience
Increasing positive brand sentiment
Discovering & mitigating brand crises
Resolving customer service issues
Improving employee pride and job satisfaction
Creating relationships with partners and suppliers
When setting new goals, ask:
Does the campaign fit our current business objectives?
What are the KPIs?
Can I measure the KPIs effectively?
How does this campaign contribute to our wider business strategy?
Focus on objectives that are most likely to contribute to your business and department goals.
Remember, the best goals are SMART goals.
SMART goals are specific, measurable, achievable, relevant, and time-bound. They provide a clear direction and help keep people focused and motivated.
Understand Your Audience
To achieve a higher ROI, it's important to understand your audience and their preferences. Conduct market research and analyse your target demographic to create content that connects with them.
Develop buyer personas to understand their needs, interests, and pain points; this is particularly important in future-proofing your campaigns.
For example, if you're targeting millennials, use visuals, fun language, and interactive elements in your content to make it more engaging and effective. For Gen Z, it’s got to be entertaining.
Social Media Channel Selection
Your choice of social media channel makes a big difference in campaign success, as the audience uses each channel for different reasons.
People visit Facebook to connect with friends, family and community groups; they get their news from Twitter, lifestyle inspiration from Pinterest, discover new foods through Instagram, and get involved in challenges on TikTok.
Make sure your content is suitable for each audience and platform.
Quality Content
Creating high-quality video and visuals is essential in a saturated social media landscape. Focus on delivering value to your audience by providing relevant, exciting, and entertaining content.
Experiment with formats like short-form vertical videos, broadcast channels, and interactive posts to capture attention and drive engagement. Ask questions and spark a conversation with your online community.
Posting Frequency & Times
The timing and frequency of your posts can greatly impact your social media ROI. For instance, posting when your followers are most active can lead to higher engagement rates.
Use the analytics tools on each platform (or your reporting dashboard) to identify the best times for your audience and adjust your posting schedule accordingly.
Use common sense, too; there’s no point trying to reach people before work if they’re on a train and unlikely to get a signal; if they can get a signal, keep it short and save the longer content for evenings and weekends.
Test and Optimise
Regularly test and optimise your social media campaigns to improve their performance.
Test different types of ads, such as image-based, video, carousel, or interactive ads.
Split your audience into different segments and deliver tailored messages to each group. Monitor the performance of each segment to discover which audiences are most responsive to your campaigns and generate better results.
Test different ad messaging variations, like headlines, copy, call-to-action buttons, and value propositions. Which ones yield the best results?
Stay Updated on Social Media Trends and Tweak Your Strategy Accordingly
Social media platforms and trends constantly evolve. Stay updated on the latest trends and changes in consumer behaviour to make informed decisions about your social media strategy.
Subscribing to this newsletter is a good place to start!
Social Media ROI FAQs
What is a good ROI for social media?
A good ROI for social media is any number above zero. A positive ROI means your investments generated more value than your costs.
What is a social media KPI for ROI?
A social media KPI for ROI could include metrics like reach, engagement, site visits, leads generated, form submissions, newsletter subscriptions, signups, conversions, and sales/revenue generated.
How many KPIs should I have per campaign?
There is no fixed number of KPIs you should have per campaign; these can vary depending on your campaign's specific goals and objectives.
Focusing on a few key metrics that align with your campaign objectives is generally recommended.
For example, if you want to increase brand awareness, you might track reach and engagement. To drive direct bookings, you may track metrics such as click-through rate and conversion rate. KPIs should be relevant to your campaign and give you actionable insights.
Why is it difficult to measure social media ROI?
Measuring social media ROI can be challenging because the impact of social media can be indirect and difficult to quantify in financial terms.
What are some common mistakes?
Some common mistakes when measuring social media ROI include focusing on vanity metrics, not aligning social metrics with business objectives, and only measuring profit instead of the total value generated by social media.
Take-Away
By understanding how to calculate and interpret your social media ROI, you can make informed decisions about your social media strategy and optimise social media performance.
Review regularly and experiment - remember, if it can be measured, it can be managed.
Here's To Your Success 🥂