For any social media marketing strategy, weighing up the amount that is spent on ad campaigns against how money is made as a result is perhaps the most important thing to work out. It is a bit of a shame, then, that this is actually one of the most commonly misunderstood aspects of social media marketing. For one thing, people ask the wrong question. The most important question is not “how much should I spend?”, but “for every dollar I spend, how much do I make?”. If you can answer this question, then the amount you should spend will become clear. Of course, this is not an easy question to answer!
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What is Return on Investment (ROI)?
When we consider how much we get back for every dollar spent, we are talking about the return on investment, or ROI, of a marketing campaign. The ROI is something that many highly qualified economists have been employed to work out. The truth is that there are certainly ways of measuring it and arriving at a figure, but this is not always easy.
Nevertheless, there is at least something you can do to work out the ROI for your ad campaigns – or at least arrive at a ballpark figure. Engaged Media, social media strategy specialists, advise that you should also regularly reassess your ROI as it can be subject to change as your business grows. This at least has the upside that, once you have worked out your ROI on more than one occasion, you will have some reliable data about how successful your ad campaigns are.
How Does ROI Work?
However, before going on to the ways you can measure and positively influence your ROI, it is worth setting out just how it actually works. Naturally, understanding this is the first stage towards positively influencing it. Specifically, social media ROI is a measure of the sum benefits delivered by a social media marketing campaign as compared to not only the money, but the time and effort put in. ROI is expressed as a figure and the golden number you are looking for is one. At one, you are breaking even; above one, you are making profit.
So, a ROI of one means that spending one dollar on an ad campaign will get you one dollar back. But if this refers only to money, where does the aforementioned time and effort come in? A figure for ROI needs to reflect this too, and the way it can do so is if the time and effort are themselves converted into money. That means the input figure for calculating ROI should be the amount spent on the campaign plus the monetary value of a certain amount of time worked and effort put in. This becomes important if you are paying someone else to manage your social media marketing.
How to Boost ROI
The best strategy for boosting ROI is to develop both a rigorous budget and to continually evaluate ad performance. That means that you should develop a budget, spend, calculate ROI, re-evaluate the budget, spend again, and see whether the ROI has improved or not. It must be said that, sometimes, you will find yourself doing this several times before a promising ROI figure is arrived at. But this is the way to proceed.
As a final point, it is worth pointing out that, once things get moving in the right direction, they tend to pick up speed. The trick then is to have patience and work hard until you start to see the ROI increase. Once it does, it can be expected to continue.