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Analyzing how you should spread your resources across social media.
Social media may not charge to post on their platform, but there are many costs and resources involved in a social media platform. You may need to analyze the return you receive for the resources you invest in social media.
What it is: The social media analysis compares returns or results of your social media activities against the cost and resources involved in managing the social media platform.
What it does: It determines the relative value of each social media platform and lets you know whether there is any positive return from your involvement and which platforms to target for the greatest returns.
How it is used: Often, a marketing or public relations (PR) group will decide that they should invest in many different social media platforms. They often will invest resources in their own personal favorite platforms, start with the platforms that are the easiest to use, or apply resources evenly across the platforms. None of those approaches will likely provide the optimum application of resources. The financial analysis allows the marketing or PR group to focus resources on the platforms that will provide the best returns for the invested resources.
Where: Some marketing or PR groups will have the financial knowledge to complete the analysis themselves, but often a financial advisor completes the calculations. Even if a financial advisor contributes, the marketing or PR groups supply the data or assumptions to use in the financial analysis. Some results can be measured in financial metrics (revenues or costs), but other times, the platform is being used for increasing awareness or perception, where they may not be any measurable financial metric. Here you may need to determine what you think it would be worth to have followers, click-throughs, etc., and what expenses you would be willing to assign for those results.
Why: An organization does not want to waste resources on social media that don’t provide enough value to justify the resources expended. In addition, the marketing and PR people will want to apply all resources possible on the social media platforms making a positive impact on the returns and value of the organization. Focusing limited available resources on the social media that provides the biggest bang for the buck will make your company or organization more effective and efficient.
Where it shouldn't be used: There may be certain notification requirements from government or industry standards that require you to make certain things public. You need to make these resource investments even if they do not have a positive financial return.
Any restrictions: Be careful to not allow unreviewed assumptions to be used in the financial analysis. There needs to be some verification or evidence of the projections used in the financial analysis. As in any financial analysis, garbage in, garbage out!
Warnings: There may be some types of social media that keep your name out in front of important stakeholders even though it has no measurable impact on actual revenues or profitability returns. There can be social media platforms that make people feel better about using your company, organization, product, or service, even though that platform does not drive any discernable direct revenue impact. This kind of activity can retain customers or create return customers, but that may be difficult to measure.
Gather data:
If you are using social media to increase sales, you need to determine where social media will help and measure the impact on revenues.
Are you trying to attract people to your web page? Look for measurements of how many people came to the website from the platform.
Are you trying to increase the percentage of visitors to the website who complete a purchase? How did the platform impact the rate of conversion of visitors to purchases?
Are you trying to encourage people to feel better about using your product or services? You may need to measure reviews and testimonials or the number of repeat customers based upon platform performance.
Why are you using social media? What are you trying to accomplish?
Consider what metrics you will use to measure the effectiveness of your platform performance.
Gather the metrics from each platform. See the demonstration video (Social Media Marketing—ROI) and pay particular attention to the videos that cover measurement tools for each platform.
Measure (or project, where data is not yet available) the cost of participating on each platform (see the template and example and video for ideas).
Capture the cost of all activities and resources utilized to manage the platform.
Use Google Analytics to understand the tracking between social media and your website and sales on the website.
Analyze the data:
When you can determine the impact of each metric on revenue of the social media, you can easily fill in the financial template.
When your goals are awareness and name recognition, you have to project value for clicks, engagements, website visits, etc. and use that value to compare to the costs of managing the platform.
Utilize the template to build your calculation, divide profit improvement by platform expenses to calculate ROI, or build a prioritization table that subjectively compares the efficiency of reaching your goals.
Try to identify the financial impact of the measurement tools for each platform by calculating ROI.
Interpret the results:
Measure ROI by comparing the profit generated by the social media posts (using Google Analytics for metrics) as profits divided by expenses invested.
Measure ROI by assigning an estimated value tospecific numbers of followers, engagements, etc. and dividing that value by the expenses and costs used to manage the platform.
The important measurement is return on investment (ROI). If the return is positive then you are making a good choice to invest in the platform.
The better choice is to prioritize your invested resources so you are investing more resources in the platforms that provide the most positive returns within your portfolio of social media platforms.
Present results:
Charts, graphs, tables, and other graphical representations can be valuable in displaying returns or effectiveness of each platform and comparing them against each other. Recommendations for how much you should invest in each platform can be made from the comparisons on returns and efficiency.
A bar chart showing the different ROIs for each platform is an effective way to show the differences in platform efficiency. A table that shows the relative investment planned in each platform can display the recommended investments by platform.
This content is provided to you freely by Ensign College.
Access it online or download it at https://ensign.edtechbooks.org/projectbased_internships/financial_analysis_of_social_media.
