As social media solidifies itself as a standard channel, marketers are increasingly expected to prove return on investment. For instance, whether the consumer purchase funnel for your product or service is linear or calls for a more complex conversion path, your chief financial officer is probably looking to you to show the impact your Facebook activity is having on sales.
Establishing a direct link between Facebook ad spending, page fans, and actual sales is still a challenge in most cases, despite the fact that a growing number of marketers are putting their efforts behind building and engaging fan bases through organic and paid social media management. Measuring the impact of these efforts on business results is the ultimate test for the validity and effectiveness of any social marketing program.
One way of doing this is through an integration of performance data sets for Facebook ads, Facebook insights, and Web analytics into one single coherent framework that allows you to analyze the effects of one channel on the others.
To enable marketers to understand how to determine Facebook ROI, I’ll present a model that is relatively easy to construct in order to determine the sales impact of Facebook marketing.
Step 1: Are We Succeeding In Building A Community?
In the example below, we see how Facebook ad spending influences Facebook fan acquisition, the first step on the road to understanding the value of Facebook ad media investment. We can see that after building some awareness and trust among the community, the community grows with advertising investment.
Step 2: Are We Engaging Fans And Driving Them To The Website?
The next step is to show how fan growth is correlated with visits to product pages on the website. Clearly, visits to the website that originated from Facebook follow our efforts in building a community.
Step 3: Are We Driving Conversions From Facebook?
If you have goals set up, segmenting even further shows how Facebook ad spending drives goals originated from Facebook.
For example, you can set up the following goals:
- Goal 1: Product page visits.
- Goal 2: Placement of product in the shopping cart.
- Goal 3: Sales (this being the classic sales funnel).
Based on the aforementioned goals, here are the success metrics we’ll measure:
- Success metric for goal 1: Average time spent on site.
- Success metric for goal 2: Product page visits.
- Success metric for goal 3: Total revenue and average revenue per transaction.
Once you establish a testing model, it’s relatively easy to compare performance with other marketing channels by segmenting visitors coming from Facebook (with Facebook in the referrer URL) and visitors coming from, say, paid search.
Benchmarking the performance of Facebook traffic against other channels (like paid search) for each stage of the funnel will provide critical insights that will help optimize marketing spend through the sales funnel. For example, if the average time on site is greater for the Facebook traffic than with paid search, then Facebook’s share of the marketing budget at this stage should be increased. And if total revenue is greater with paid search, yet revenue per transaction is greater with Facebook, this would indicate that Facebook is delivering fewer yet higher-quality customers. In this case, Facebook would be more effective in the later stages of the sales funnel.
Optimizing these key performance steps every day — for different campaign and target segments, as well as products and territories — will enable brands to determine the relative sales impact and ROI of Facebook marketing. By understanding the true value of Facebook based on data most marketing organizations have, marketers will gain increased credibility from their CFO and the rest of the management team.
Katrin Ribant is the chief solutions officer at omni-channel marketing analytics solution provider Datorama.
ROI image courtesy of Shutterstock.