Measuring Social Media’s Effect on Online Sales and Revenue

The ability to determine success from social media is somewhat of a grey area. Social media’s word of mouth marketing and conversations are priceless, but can be difficult to measure since it is ocurring on various sites with different analytics programs in place (if at all). As usage increases (69% of online adults use social media), measuring social media campaign effectiveness is becoming increasingly important (Brenner, 2012). Metrics can tell a story, but as social media becomes more mainstream, management wants hard numbers to quantify re-investment, analogous to any other marketing activity. How can an organization prove conversations and brand awareness have an impact on revenue and sales? Having the ability to tie hard numbers to social media can put money into a digital marketing budget for value-added campaigns and initiatives. (Holmboe, 2011). If social media is bringing in the bucks, an online marketer might decide to put less money into pay-per-click ads and affiliate marketing, which can be costlier than social.

Some, like Courtney Seiter from marketingland.com,  argue that true social media ROI cannot be determined right now and that’s “okay .” “Campaign variables (creating campaign urls for analytics tracking), landing pages and forms and multi-channel funnels can help quantify social media but we’ll never be able to quantify every lead, every brand-awareness lightbulb moment, everything social does for us,”(Seiter, 2011).  I get it. There are actions and leads generated on social media that we are not aware of and unfortunately, we cannot capture. Especially in regards, to “dark social media” defined as sharing via email and IM which is virtually impossible to measure (Seiter, 2011). I contend that we can measure that we are aware of and of course, just like anything in life, we can’t measure it all but utilize the tools and resources we have to determine social media success. 

Tracking sales attributed to social media is a large piece of the ROI pie. Any online retailer is always asked the following questions, “Does your social media activity result in a sale? If so, how many and what revenue is generated?” Site Catalyst, a web analytics program, can tell you in the Referring Domains report how much traffic is coming from social media, which channels and the dollar amount tied each social media site. More often than not, the revenue is low and as a result can affect the resources an organization might allocate to social media projects.

Below are some different ways to calculate sales attribution to social media.

This can be done in a three-part process:

1.       Define your social media goal, which in this case, would be to increase online sales.

2.       Define the social media return in regards to the goal—This can be defined as revenue associated with a campaign.

3.       Define how hard dollars will be tied to the social media return (Holmboe, 201).

 

In regards to number two, social media sales attribution can be tricky but can be viewed through a few different metrics’ lenses such as:

 

1.       Monitoring last-touch sales via web analytics to follow a user upstream to see where the entered. This point of entry can be another site, such as a social media channel.

2.       A second method is to provide our users with social media campaign–only coupon codes, which means that if a user checks out with this coupon code, that sale can be attributed to a specific campaign.

3.       Forecast the value of our sales without a social media campaign. Compare actual sales with forecasted sales, assuming that the actual sales are higher than the forecasted sales, and using that as difference as the value of our social media return.

4.       Social media ROI = (return – investment) / investment % (Holmboe, 201).

Source: Holmboe, D. (2011). How to estimate your social media return on investment. Socialmediaexaminer.com. Retrieved from http://www.socialmediaexaminer.com/how-to-estimate-your-social-media-return-on-investment/.

 

With some diligence and the proper tracking, sales and revenue from social media can be monitored and translated to ROI for social campaigns. Compared to pay-per-click campaigns for example, social media efforts are less expensive. “52% of retailers in a recent online survey from digital marketing firm Webmarketing123 said they planned to increase their social media marketing budgets in 2013, outpacing the percentage that plan to increase spending on search engine optimization (45%) and pay-per-click advertising (40%). Social media spending by all marketers in the United States will near $5 billion by 2016, according to Forrester Research Inc.,” (Moore & Stambor, 2013).

References:

Brenner, J. (2012). Pew Internet: social networking (full detail). Pew Internet. Retrieved from http://pewinternet.org/Commentary/2012/March/Pew-Internet-Social-Networking-full-detail.aspx.

Holmboe, D. (2011). How to estimate your social media return on investment. Socialmediaexaminer.com. Retrieved from http://www.socialmediaexaminer.com/how-to-estimate-your-social-media-return-on-investment/.

Moore, S. & Stambor, Z. (2013). The new math. Internetretailer.com. Retrieved from http://www.internetretailer.com/2013/01/04/new-math.

Seiter, C. (2012). Why social media ROI can’t be measured—and why that’s okay. Marketingland.com. Retrieved from http://marketingland.com/why-social-media-roi-cant-be-measured-and-why-thats-ok-25279.