Does Social Media Make Money for Small Business Owners?
In this blogpost we’ll discuss:
- What is the ROI on social media?
- How Business Schools measure ROI
- Definitions of Social Media Engagement
- Social Media Analytics
- How to Track New Leads at the Point of Sale
- What will be your ROI on social media?
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Small business owners work hard for their money – over 70% of small businesses are owner-operated which means the owner is on-site, everyday.
Could you create social media content while at work that attracts new customers? WARNING: social media content creation in NOT FREE – it takes time.
We hear that ‘Time is Money’. Time is NOT money; your time is infinitely MORE precious than money. You can always get more money but you can never get more time.
So, will your small business make more money if you invest in social media marketing?
If you do social media like Dr. Pimple Popper you’ll make a lot of money!
And, we can show you how to do it WITHOUT spending a lot of money!
What is the ROI on Social Media?
ROI is Return on Investment.
When you spend a dollar, you want to know that dollar is working hard for you. In other words, ROI tells you if that marketing investment gives you back more than a dollar.
New Revenue / Previous Revenue = Return on Investment (ROI)
Marketing can be seen as internal or external: internal marketing focuses on your CURRENT CUSTOMERS while external marketing focuses on the wider world and attracting NEW CUSTOMERS into your business.
There are only 3 ways to make money in business. For social media marketing to give you a positive ROI, it must do one of these three things:
- You must bring in NEW CUSTOMERS to your business.
- You must persuade some of your CURRENT CUSTOMER to spend MORE per visit.
- Some of your CURRENT CUSTOMERS would need to purchase MORE FREQUENTLY from you.
You may not immediately see the direct link between a social post and an increase in revenue. Linking the revenue attributable to an online ad is complex – which we cover in ‘Analytics’ below.
How Business Schools measure ROI
Business schools teach a simple calculation: Money Invested over a Time Period / Money Returned in that Time Period.
This post from Boast.io discusses one way to measure ROI from social media ad spend:
“You can measure the ROI of online reputation management through social media using improvements to your traffic and social score.
For example, if your engagement grew 100%, traffic from social media increased 50% and your average conversion rate is 5%, total sales increased by 2.5%.
This also indicates that an 100% increase in engagement means a 2.5% in sales.
To measure your ROI, divide this increase in sales by the total amount spent for online reputation management.
Social Media Analytics
For Facebook, simply go to https://www.facebook.com/analytics while logged into your Business Page (not Personal Page – although in many small businesses, these are one and the same).
Google Analytics is very powerful but may require separate setup and monitoring. Once you’ve set-up this powerful tool you will have a much better understanding of your social media results.
Last Click Attribution attributes the revenue to the last ad or post the customer clicked. This is straightforward to set-up but may not give the best data. For instance, Facebook uses a 30-day attribution model which assigns sale revenue to an ad clicked up to 30 days ago.
More accurate and more complicated Multi Click Attribution does just what it sounds like: each click a customer performs prior to the purchase is monitored and the contribution of each is then gauged.
As you might imagine, this gets very complicated, very quickly and is usually managed by a vendor/partner.
Definitions of Social Media Engagement
To understand your numbers from Followers, Engagement, Sentiment and Traffic, we’ll need to use the definitions provided by Boast.io:
Followers: Whether you’re looking at Facebook, Twitter, Instagram or another platform, followers are a fairly good indicator of customer approval on social media.
According to Sprout Social, your followers are about 57% more likely to be customers. Keep in mind that bots and other businesses will skew your organic follower numbers somewhat.
Engagement: Likes, retweets, reposts, mentions, comments and other types of engagement are also a measure of social media approval. This, like followers, is a fairly easy number to gauge, and requires only basic social media monitoring services. However, remember that not all engagement is positive.
Sentiment: This may be the most difficult social media KPI to measure, but it’s also the most accurate assessment of online reputation management on social media. If your total mentions and engagement is relatively low, you can skim through your mentions to get an average, or set up keyword filters including your brand name and positive or negative words. Social media management programs like Hootsuite or Sprout Social also have special algorithms to measure the public’s view of your company on social media.
Traffic: The total website or store traffic you get from social media isn’t a direct link to your social reputation. However, it is an important metric for measuring ROI. This means you’ll want to measure traffic from social alongside one or more of the previous three reputation indicators. You might use tracking codes, link click-through rates, or Google Analytics to measure your traffic from social media.
Hard-working business owners need to make sure every dollar counts. You don’t to be a expert on the above terms – most social pages have analytics that simply tell you how many Followers, how much Engagement, Sentiment and Traffic you have.
Bear in mind, these metrics are often called ‘vanity metrics’ because they ‘look good’ or they make you ‘feel good’ but they don’t pay your bills.
How to Track New Leads at Your Point of Sale
Your ‘point-of-sale’ may be your checkout counter, office or clinic – wherever your customers enter and exit your office or local storefront.
A ‘lead’ is ANY person calling, walking in or inquiring about your business. Collecting their Name, Email and Phone number is an essential skill for your Front Office Team. Record this data, manually, on a spreadsheet. If you are a ‘bricks-n-mortar’ business then old fashioned manual recordkeeping of incoming new leads is STILL the best way to track new leads.
Track periodic changes in new leads on a separate spreadsheet. Consider a Weekly or a Monthly tracking spreadsheet. In your spreadsheet, you’ll track the answers when you ask customers the question “How did you hear about us?”
Use this ROI Tracking Spreadsheet to get started
Let’s say possible answers to the question “How did you hear about us?” are the following:
- Facebook page
- Google ad when searching for <<< your business >>>
- Email campaign
- Saw your billboard
- Friend told me about you
I prefer to ask continuously, throughout the day rather than a single point in time. Continuous tracking of the answer should closely track your marketing spending – assuming you are continuously marketing your small business.
Then, when you spend money on social media advertising in a period, for instance the month of October 2020, your spreadsheet should record an increase in new customers for that same month.
- Facebook page – 2 new customers
- Email campaign – 2 new customers
- Friend told me about you – 5 new customers
These results are typical for many small businesses.
If each new customer has a Lifetime Value of $500 (click here to see how Lifetime Value is determined) then your marketing returned $2,000 for this period (we won’t count the ‘friend’ referrals which would have happened without the ad spend).
Return on Investment (ROI) is simply the return in dollars for that period divided by the dollars invested. Let’s say your small business spent $1,000 in social media ad spend in May 2021 for a return of $2,000.
200% ($2,000/$1,000 = 200%) is a pretty spiffy ROI on any kind of ad spend!
Check out more examples of social media ROI calculations for a plastic surgeons’ office.
What Will Your ROI on Social Media Be?
Tracking new leads is just the beginning to understand your social media ROI. In order to improve ROI, you should start tracking your investment, both time and money.
In all likelihood, you won’t get 200% ROI in the first month but, as you keep working your social media program and keep tracking your results, your ROI will improve.
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