In Step One of our three-part series about Monetizing Your Social Media Channel, we have defined the data needed to create sales-based metrics sourced from social. Next, we will walk you through the different ROI metrics and a few real-world examples of challenges Sagepath has overcome in the past few months.
Remember, realizing your actual social value is the first step towards an intentional re-strategy. Ever wonder if that trendy Instagram pic with 350 likes converted consumers? You may never know the true number, but you can create a close guesstimate! Follow our guide below.
Step Two: ROI Metrics Defined
Using the data referenced in Step One [/blogs/strategy/articles/monetizing-social-channels---part-1], you can apply direct and valuable sales dollars to socially sourced users. The metrics below should get you started; however, there are many ways to prove social success, depending on your business purchase path.
- Conversion Rate = (Order Placed Clicks Social / Order Placed Clicks All) * 100
- Out of all the users who converted by clicking ‘Place Order’, which were sourced from social?
- Net Sales sourced from Social = (Order Places Clicks Social * Average Order Value)
- Out of the users sourced from social who clicked ‘Place Order’, what are the sales value of these orders?
- Note that if the website has direct access to the order per each click, this data should be used. If it is not, we can calculate the average order value and multiply it by the number of order clicks. Not 100% accurate.
- Social ROI = (Net Sales from Social / Social Cost) * 100
- Are we profiting from social or losing money?
- Social Customer Value = (Average Online Order Value * Average Purchase Frequency per unique Online Customer)
- For every user we acquire that is sourced from social, what is the estimated customer value we can assign that user?
- Similar metric to Customer Lifetime Value.
It doesn’t take a math whiz to know that the above formulas are actually very simple. The grey area comes in collecting accurate data and defining social conversion when the site lacks a perfect purchase path. If Social sales data was this easy to come by, more people would be doing it! Here are three scenarios Sagepath recently experienced and how we overcame data gaps:
Problem 1: “I have a third-party billing system setup on my ecommerce site, and I can’t tag their system to see actual conversions from social.”
Solution: First of all, contact the third party and request this information. If they are unable to provide this information, there is a workaround-- find or create a trigger on the site that would most likely lead to a purchase conversion. In a recent example from Sagepath, we added and tagged an ‘Order Now’ button to the site before being redirected to the third-party pages. We knew from Google Analytics that out of 10,000 button clicks, 250 of those button clicks were sourced from Facebook. The Third-Party Billing company reports that 500 transactions were placed during that time period, equivalent to $100,000. This means that overall, we’re at a conversion rate of 5% (500/10,000). If this conversion rate holds true to Facebook, we can assume that 12 of those users were sourced from Facebook which is an approximate of $2,500 in sales.
We’re dealing in indefinite numbers, and that can be scary to a seasoned financial analyst. However, before we knew nothing about Facebook sales, and now we have a reasonable estimate! Another method to track specific boosted posts and their conversion rates is through offline Pixels. These APIs can be applied to promoted posts only on Facebook and Instagram, and will track the user behavior who selected the add. For more information, check out the Facebook Help page here.
Problem 2: “My customers purchase 99% of my products in-store. How do I calculate social ROI on sales in-store?”
Solution: This is a tough one and there is no perfectly accurate answer. Fundamentally we need to ask how can we measure more from social? Here are some ideas Sagepath recommends:
- Survey customers asking what brought them into the store for a month. Create a conversion percent of how many found your store via social and apply that to sales.
- Test the success of your social channel by publishing a promotional post ‘Follow us @XXX and show us this post in stores to receive a 15% discount on your order from now until midnight.’
- Inform employees that a specific discount code will be applied at checkout for this promo
- From the start to end time of the promotional post we can calculate foot traffic, transaction count, discounts, sales on discount orders, and more to determine if social has a real impact on sales or not.
- Feel free to experiment! Sagepath determined that a certain client’s in-store sales were dropping off at a single location. We focused social and PR efforts on that store while staying within our projected social budget. We were rewarded with a 7.6% increase in monthly sales for that location.
Problem 3: “I want to prove social ROI against non-sales related goals. How do I do that?”
Solution: Due to the amazing technology of Google Analytics, Tag Manager, Data Studios, and other software, we can customize goals and assign a dollar value to virtually any customer behavior we want. What do you want to measure and what value do you want to assign it? Determine with a strategy team what are valuable customer behaviors and what weight or value should be assigned to each. Then apply a tag to this trigger, and create a goal in Google Analytics. Filter the metric to measure if the goal completions are being sourced from social in Data Studios.
Below are a few non-sales related goals:
- Newsletter sign ups
- Location search
- Create an account
- Favorite an item
- Submit a quote request
- Online reservation
- Submit application
- Search careers
- Share article
This proves that social drives customer behaviors, which still contributes to the bottom line, even if they are not sales numbers.
Stay tuned for Step Three: Dashboarding in Google Data Studios! We’ll walk through data visualizations and creative designs in our favorite responsive dashboarding tool.