The times when social media was irrelevant and businesses were present there just for fun are far behind us.
Now, the element of entertainment is probably at the very bottom of the list of reasons why companies decide to be active on various social media platforms.
Driving sales, increasing brand awareness, and attracting targeted audiences are just some of the drivers for companies to have a presence on social media. Of course, you may think that the content you see on your favorite company’s Facebook profile is funny or even totally irrelevant to their services.
But have you ever taken a closer look and noticed all those CTA buttons and other lead and conversion tools that have a much deeper purpose and meaning for that company?
It is all about generating revenue. In the end, if businesses want to succeed, they must make profits. That is what makes them grow quickly. If you run a business yourself and wish to increase your revenue from social media, you must measure and analyze. ‘What should I measure and analyze?’ you may ask. The answer is Key Performance Indicators (KPIs).
In this article, we will share with you the key social media metrics that should be of particular interest to your company’s bottom line.
Social Media vs. Businesses
Social media is important for businesses, there is no doubt about that. Before deciding to set up social media profiles, companies should carry out some research and find out which platforms will be the best for them. The primary focus here should be on picking those platforms that attract the most users who could potentially be interested in that company’s products and/or services.
Let’s look at some statistics regarding social media platforms and their users, as well as profitability:
- Facebook is one of the largest and longest-running social media platforms, with its number of monthly active users continually rising.
- Instagram is one of the fastest-growing platforms, with 1 billion monthly active users and about 500 million active daily users.
- 72% of teens say they use Instagram, making it one of the most popular social networks for the teenage market.
- In terms of lead generation and customer acquisition, LinkedIn is 277% more powerful than Facebook, with 45% of marketers gaining clients through that platform.
- 53% of Twitter users have purchased something for the first time just because they saw it on the platform.
With 55% of people paying attention to the presence of companies on social media, as a business owner or a marketer you really want to make sure you use the potential of this channel to its fullest when designing your revenue-bringing strategy. For that, you need to keep track of certain KPIs.
Let’s explore this term further.
KPI – Definition & Types
KPI stands for Key Performance Indicator and it is basically a type of measurement of success. KPIs allow companies to evaluate their results in terms of particular activities such as product performance, increasing brand awareness, driving conversions, and so on.
There are various types of KPIs that companies can and, in fact, should track:
- Quantitative KPIs are measurements such as those of time, money, and weight; pure numbers
- Qualitative KPIs include opinions, characteristics and traits of (typically) processes and business decisions
- Leading KPIs are used to evaluate the effects of a change in processes and confirm long-term trends
- Lagging KPIs indicate success or failure of a project at the end of a certain period of time
- Input KPIs allow companies to monitor resources used in a business process, such as work time or equipment
- Process KPIs are designed to help organizations assess the efficiency of their processes and implement helpful changes, and are used very often with customer support tickets
- Output KPIs are the most commonly used type of KPIs to measure the success or failure of a business activity, and examples include profit or customer acquisition rate
- Practical KPIs look at the current actions of a company and analyze their impact
- Directional KPIs assist companies in assessing specific trends within their companies
- Actionable KPIs help establish a company’s level of commitment and effectiveness at implementing changes
- Financial KPIs concern economic stability, growth, and business viability, with examples including gross profit, asset rations, and net profit, etc.
Now that you know what types of KPIs there are out there, let’s focus on why they are needed before we share the most important ones for measuring your social media marketing strategy’s effectiveness in terms of revenue.
KPIs – why they are important and how they can be used
KPIs are important metrics for accomplishing various business objectives. Companies need them to progress and meet business or marketing goals.
One of the biggest advantages of effective performance indicators is that they allow companies to stay focused on what is important by defining expectations and setting the right paths of action. Even things as simple as staff meetings can be improved with the right performance indicators.
Last but not least, KPIs are great when you want to track your revenue generated by social media marketing. But what to look out for?
KPIs that matter to your bottom line
Now, straight to business. What to look at when measuring your social media marketing strategy in terms of the bottom line:
User Lifetime Value
Sometimes also called Customer Lifetime Value (CLV or CLTV), this is a metric that indicates the total revenue a company can possibly expect to earn from a single customer throughout their whole business relationship together. In other words, it is the net profit contribution of a customer over their lifetime to a specific firm.
Knowing your user lifetime value allows you to find the right balance when it comes to short-term and long-term marketing objectives for your business. By tracking this metric, you can also develop a better understanding of the financial return on your investments in social media marketing.
PRO TIP: To increase your user lifetime value, focus on building meaningful relationships with your customers and listen to their needs carefully. Pay attention to creating a high-end customer experience and delivering valuable content to keep your customers engaged.
Customer Acquisition Cost
Every time you launch campaigns, you should look at social media metrics like audience reach, impressions, click-throughs, likes, shares, comments, and more. However, when focusing on generating revenue from your social media campaigns, what you should specifically pay attention to is how much money you have to spend in order to convert someone from your target audience on social media into a new customer.
To calculate this, you need to divide the total amount of money spent on acquiring new customers (social media marketing campaign expenses) by the number of new customers acquired during a particular period the money was spent on.
Knowing the value of this metric will allow you to establish whether or not your campaign was worth spending money on and how many new customers you can expect to acquire in the future from social media if you spend a particular amount of money on advertising.
PRO TIP: Make sure to calculate the CAC separately for each social media platform you are active on in order to figure out the most profitable one.
Average revenue per user (ARPU)
Finding out how much money on average each social media follower spends at your company will allow you to better plan your social media strategies in the future. You want to know the average amount of money your audience is willing to spend with your company so that you can adjust your ads accordingly.
Knowing that will not only allow you to target them with products in a similar price range in the future, but also help you to tailor your product portfolio specifically to the needs of the types of customers you attract with your offers and create a more detailed average customer profile. All of this will allow you to generate more revenue and thus earn more profit.
PRO TIP: Note that some users will spend more than others and some will spend less on your products. Moreover, just because someone spends $10 at one point does not mean they will not make a purchase worth $100 the next time. Keep this in mind and do not forget to diversify your adverts from time to time.
Social media campaigns can have various objectives. You may want to get more page likes or leads, boost your existing content, or maybe receive more messages. When your goal is to promote your products, you need to look at metrics like sales revenue to ensure that spending money on such an objective will be worthwhile.
It is natural for companies to want to make profits, and campaigns like those on Facebook allow for doing just that. It is important to know, however, how your efforts to make profits on social media actually impact your bottom line. Focus on figuring out how much revenue your company generates from sales that were initiated on your social media profiles. This will allow you to see if such campaigns are profitable for your business.
Moreover, knowing what products sell well and attract customers is a great way of discovering ways in which to improve your product portfolio so that it meets your customers’ demands.
PRO TIP: Add CTA buttons to your adverts on social media to make it even easier for customers to reach you and your products. Perform A/B tests on various styles and formats of those buttons to find out which ones respond most effectively.
Lead Conversion Rate
This metric will enable you to calculate the percentage of qualified leads gained through social media that actually result in sales. For example, you may be interested in knowing how many out of 100 website visitors coming from your Facebook or Instagram profiles end up buying a new product that you have just invested in promoting on those platforms. Knowing this allows you to determine how many customers you are capable of acquiring with specific campaigns.
Bonus points for you if you already have quite a large audience for your social media accounts. A wide audience works as social proof and will add to your company’s authenticity and credibility. Thanks to this, people who see that your campaign has many likes, shares, and comments will be more likely to take an interest in your company and become customers.
What other social media metrics should marketers pay attention to?
If only these 5 KPIs could tell you everything about your social media performance, it would be great. Unfortunately, it’s impossible. You can use them as a good starting point to dig deeper into your financial results and gain a greater understanding of them. In addition to these, there are several other social media metrics you should examine to determine how effective your social media marketing is. What are they?
- Social Media Conversion rate – the percentage of visitors who, once they click through a link in the post, take action (e.g., subscribe to your newsletter, purchase a product or register for a course) against the total number of conversions.
- CPC (cost per click) – how much you pay for every click on your sponsored social media post.
- CTR (click-through-rate) – how often people click on the call-to-action link in your post.
- Bounce rate – the percentage of page visitors who click on your post, only to quickly leave the page they land on (without taking any other action)
- SOV (Share of Voice) – to find out how often people talk about your brand organically (this way, you will be able to establish your market position). It might be challenging to gather all the mentions manually, so it’s handy to use such tools as Mediatoolkit in this case. It will automatically collect all your brand mentions and, what’s more – detect their sentiment.
How to be better than your competitors
Companies do not like competitors, that is for sure. In order to perform better and generate more revenue than them on social media, their every move must be analyzed. Whilst it is easy when you are a small company and your competitors are too, things get complicated the bigger your company becomes and your competitors turn out to be.
You may not have the resources (such as time or staff) to constantly track each of your competitors’ posts, likes, shares, and comments, which is why some smart people have invented the perfect solution – a social media monitoring and social listening tool to analyze your competitors, as well as key market and industry trends. With tools like Mediatoolkit, you no longer have to worry about not staying up to date with your competitors’ agendas.
Social media and revenue – a loving relationship made possible thanks to KPIs
This article allows you to deepen your knowledge about the importance of social media for businesses, as well as the vital role of key performance indicators (KPIs) in the success of your business and its presence on social media.
When one of your main goals on social media is to generate revenue, you must track and measure the performance of your campaigns and profiles to ensure that you focus on the correct elements. With the right social media metrics, you can follow your effectiveness and ensure your work brings profits. Let’s summarize our key recommendations:
- Track your audience’s behaviour
- Calculate your revenue on a regular basis and separately for each social media platform
- Keep an eye on your competitors and their plans
Now you are ready to boost your company’s revenue with social media. Be mindful of these recommendations and use them to their fullest potential. If you are interested in learning more about the importance of monitoring your performance and online presence, as well as your competitors and industry trends, make sure you check out our blog.