Transcripts
1. Introduction: Hi, and welcome to this class on social media are my name is does CIA. I'm the founder of Critical Social and a social media strategist. I'll be taking you through the material today. Now this class is designed for marketers, have some prior experience with social media and solve some basic math skills like understanding percentages, fractions and negative numbers. But don't worry if you have worked out your portion of the bill in a restaurant, even if you needed to use a calculator, you have more than enough math skills to take on this course. This course is most suited for social media managers, account managers, marketers, entrepreneurs and aspiring strategists. It comes with a workbook, which contains two exercises and your arm and cheat cheat, which will use to submit your project. Now I'm going to try to see as many of the projects of that can and get feedback on them. So please don't be shy in submitting yours. Now. I'm sure you're keen to jump in and start learning, so let's get started
2. What Is ROI?: welcome to this lesson on social media are a y. Measuring return on investment is a key skill for marketers, and it's quite a rare one to, in fact, according to Social Media Marketing industry reports, Ah, whopping 90% of marketers aren't confident that they can measure R. A. Y. I don't think that's because R A. Y is particularly difficult or complicated. It's actually a pretty simple some. As we'll see, I think it's because many marketers don't have a clear plan of what to measure, how to go about it and how to communicate their results, which is everything will be covering. In this lesson. This lesson is designed to take you through our wise step by step, simplify it and give you a deep understanding of how to calculate it for yourself, no matter what kind of social media you're running. So if you commit to this lesson and do the exercises, you'll be in the top 10% of marketers who can calculate R A Y without breaking a sweat. So let's start with the basics. What exactly is our why R. A y stands for return on investment? Return on investment is a measurement of how much value you get out of what you invest. So we calculate our Y for several reasons to know if the work was successful or not, to compare different strategies to see which one has the best return, and to prove to others with a simple, to understand metric that what we're doing is a good idea. It should be the final step of any good campaign. Once you've set your goals and executed your plans, you've gotta look back on it all and ask if it was worth it. To put it another way, aren't my left to see the whole picture of our work from start to finish? When you run a campaign, you measure how much you put in. That's the investment. Investment doesn't only mean stocks and bonds. It's anything of value you put into the work and then you'll measure how much you got out of it. That's the return. When we compare the return with the investment, we get our our my number. Ideally, we want to return to be bigger than our investment. That means we actually made money. The R Y percentage tells us how much bigger or smaller the return was compared to what we invested. It's expressed as a percentage, So it's easy to understand, no matter how much or how little you actually spent. There are three types of R Y. A positive r A y is the one you want. That means you made more than you spent. The percentage shows how much more you made. So if you got 100% are why you doubled your money. A. 0% R A y is called breaking. Even you spend, for example, 100 then you made 100 so you didn't really accomplish much. Besides avoiding debt. Now a negative R A y means you made less than you spent. We show this with a minus sign in front of the percentage. If you're R y is negative 100% you spend twice as much as you aren't. So we've covered what return on investment is and learn the difference between positive negative and break even. R A y. If all this seems a bit vague right now, don't worry. We'll cover some real life examples soon, but next will be looking at the scope you'll measure, as well as how to interpret sales and conversions for your our. My calculations
3. Scope and Measurement: you're watching our lesson on social media are y. We've just gotten an overview of what our ally means to us, so let's get to the nitty gritty the formula. The R Y formula isn't exclusive to social media marketing. In fact, it could be used to express the value of basically anything. The formula itself might be a little intimidating, especially if you dropped maths in high school like I did. But that's why we've broken it down into five simple steps. Here's the formula itself. Profit minus investment divided by investment times 100 equals your R Y. It's pretty simple. Once you get the hang of it. Thes five steps break down the order in which you can fill out the formula. Step one is defined your profit. Step two is defined Your investment Step three. Profit minus investment equals your net profit. That's gonna be the some that's in those brackets. Step for your net. Profit divided by your investment equals your decimal and step five. Your decimal times 100 equals your are my percentage. Let's go through a few examples so you can get used to following these five steps. Here's some simple examples for you to practice. Go to exercise 2.1 in your workbook and follow along with us there. By the way, calculators are totally allowed. I'm not very good at doing sums in my head, either. So if a calculator helps you, then go for it. For example, one. Let's say we want to sell our jewelry online so we run a product at we put $8 behind the ad it performs, and we end up making one sale out of it. The sale is $4. Let's go through our steps to Kathleen R. Y of our product ad to find your profit. The profit was four. Divine your investment that was eight. Your profit minus your investment gives us sadly a negative number. Negative four, which is our net profit. The net profit negative four is divided by our investment, which was eight and gives us 0.5, which is our decimal and our decimal times. 100 is negative 50. So we had an R y of negative 50%. We had a negative are y, which means we spend more money than we made. But hey, we didn't lose out that much. Let's see if you can do example to on your own here. We've decided that the product ad didn't do too well on its own, so we decided to run a coupon. It we spend $50 once the coupon ad ran, we made $50 in profit. Things are looking up now. Follow the five steps to calculate her R Y for this ad. First to find the prophet. Then to find the investment, take the profit and minus the investment to get your net profit. Divide your profit by the investment to get your decimal and multiply your decimal by 100. You can always pause the video if you knew a little bit more time. All right, let's look at one more example. The coupon ad didn't quite give us what we were looking for, so we've decided to invest in a video campaign to show off all her jewelry and inspire people to purchase. We spend $500 on producing the video and getting it out there, and after the campaign ran, we made 1000 $500 in profit. Now you can follow the five steps on your own to calculating the R a Y. You can always pause if you need a little more time, because on the next slide will be checking if your answers were right. Okay, let's do a knowledge check, for example. One. Our product ad had a negative 50%. R A y tough break the negative R A y means we spent more than we earned on that ad, for example, to our coupon ad had a 0% R A y, so we broke even. It wasn't a disaster, but it was a bit of a flop because we used all our prophet to run the ad, so we have nothing to show for it. For example, three we had a 200% r A Y r r. I was positive, so we made twice as much money as we spent on the ad. If you got your examples right, good for you. If your answers air different trying, watching this topic from the beginning and make sure you take your time following every step when calculating your r a y. And just as a disclaimer, these scenarios were just examples. Product ads, coupons and videos can all have positive or negative are y depending on how you execute them. Now you know the R A y formula and the five steps to calculating it. Next, we'll discuss what you'll be measuring as a social media marketer.
4. The ROI Formula: Welcome back to this lesson on social media. Are y just a note for this and following lessons? Since we'll be talking about value and money quite a lot. All the numbers will be in dollars. For simplicity's sake, there's no need to mentally convert things to your currency because all the numbers were talking about are just examples. Now we've covered what return on investment means. Let's dive a little deeper into what we're measuring. As social media marketers, many marketers avoid measuring our Why not? Because it's a complicated some, but because they're not quite sure what scope they should be looking at and what they should be measuring. So let's clarify scope first, a mistake some marketers make is trying to measure too narrowly going to one Facebook post and asking What's the R. Y of this likely won't give you accurate results. You have to measure success by looking at the big picture, for example, and awareness Post won't get you a whole lot of sales from people who have never heard of your business before. But if it gets them to like your page and opt into more content from you, it's sending people on the path to purchasing. So if we zoom in on that post, it doesn't look like we're making sales and providing value. But if we zoom out and see that it's helping convert people to fans, which puts them on the path to purchase, we can see that it has its own value. Look at your big picture. Get back to your sales funnel and remember that you need to invest in each step to make a sale at the bottom of the funnel. A good scope to measure is a campaign or a month of content. As long as all that content was working towards the same goal. You can count several posts or even several campaigns within one r A y calculation. But whether you're measuring a week long campaign or year of marketing, make sure to decide early on and clarify your scope for the sake of accuracy. And once you've decided on your scope, the next step is deciding what to measure for social media marketing their two main types of measurements to plug into your calculations, sales and conversions. We all know sales are easy to count. Someone either bought something or they didn't and we know exactly how much the value of that purchase was because it's already in dollars and cents. However, our goals aren't always about straight sales. Creating brand awareness, increasing engagement and funneling leads are all common goals in social media marketing. These are called conversions. You're converting your audience from one state to another. Someone goes from not knowing about your brand to being aware of it. That's an awareness conversion. Someone goes from ignoring your brand to joining in a conversation about your content. That's an engagement conversion. Someone goes from being indecisive about your offering to filling out a lead form that's a lead. Conversion conversions also represent value. Let's look at our sales funnel to see why every step in the sales funnel bring someone closer to being a loyal customer. And every step is a conversion. So every conversion has value to us. And if every step has value, that means we have to invest in every step, too. That's why we run things like awareness campaigns. They may not make sales directly, but they still have plenty of value in the big picture. To measure conversions properly, you need to assign value to them. just like you would to a sale. Knowing your conversion rates will help you assign that value. Your conversion rate is the percentage of people that successfully convert from one step of the funnel to another. So let's go through an example of calculating how much are conversions are worth to us. Say, for example, I have a product that makes me $100 in profit. I need to look at my whole funnel and say, How many people need to be at the top of the funnel for me to get one customer at the bottom? This is why tracking your sales is so important. We need to have accurate data to start with, so I'll look at my data and see OK, so for every 1000 people this campaign reached, we got one new customer out of it. Where did the people drop off? Out of those people who were reached, how many of them converted into consideration, liked our page and started engaging with our content? How many of them signed up is a lead and how many of them tried out the trial. Once you see those ratios, you can start assigning value so Maybe out of the 1000 people at the top of the funnel 900 decided it wasn't for them and didn't engage further. Now we've got 100 people in the consideration phase. Maybe 25% of them signed up with our lead form, and out of those 10 actually opted into the trial and one made the full purchase. We're not worried about the loyalty step in this example, since we need a longer timeframe to measure that. So let's count our conversion rates from one step of the funnel to another. At the top. We have 100 people out of 1000 going from awareness to consideration. So that's a 10% conversion rate out of those 125 moved on from consideration to lead, so that gives us a 25% conversion rate. Our lead to trial conversion rate is an impressive 40% and our trial to purchase conversion rate is 10%. The's numbers really help you see where you can improve your customer journey, but for now, let's look at what it means for our conversion costs. So if the purchase is worth $100 what are the other conversions worth for this. We work up from that $100 number and use our conversion rate percentages to give us a relative sense of value. So our purchase was worth $100. A trial is 10% of our purchase value, so a trial is worth $10 to us. That's because 10 trials equal a purchase, so $10 times 10 trials equals $100 value. We know that 40% of our leads become trials. So what's 40% of $10? It's a $4 value for each lead. We do the same calculation to count that each consideration is now worth $1 every awareness is now worth 10 cents. Now, bear in mind, we're not adding all these together to get the purchase value. Each step has its own relationship to the purchase value, and we're just seeing how to find its relative value. So if you're running a big campaign with multiple conversions, you'd set your budget according to the value of the final conversion. Otherwise, you might end up doubling or tripling your values unnecessarily. Also, of course, how much your conversion is worth doesn't always equal to how much you'll spend on it. We always want to aim to spend less than the conversion is worth to us, so we get a positive R A y. So to sum up, good measurement means assigning cash value to every conversion once you know exactly how much each conversion is worth in the big picture, your life is a social marketer becomes much easier and less stressful because you can always have a straightforward conversation about how much value you're creating without having to sell or pitch. Why social is important. Now we know how to choose our scope and how to assign value to our conversions. So let's start applying. These are OI skills to real life when nobody gives you a clear cut profit and investment number to pop into your calculation, you've got to figure it out for yourself. In our next topic will cover defining profit in social media, marketing
5. Social Media Profit: Welcome back to this lesson on social media. Are Y Now that you're familiar with the R A Y formula, let's dive into the different elements. First will be discussing profit defining profit is the first step in our our ally calculations, but most of the time we don't just have an easy number to pop into the formula. We've got to work it out for ourselves. So here are three methods of figuring out your social media marketing profit. So profit isn't just about the sales you make. Because whatever you offer, whether it's physical product, a digital product or service, it's never free for you to create. So let's start with your income. Your income is the total money coming in. From this. We've got to factor out our cost of goods. That's all the expenses it takes to create your offer so that maybe expenses like stock, raw materials, packaging, labor and overheads like rent storage and administration, so your income, minus your cost of goods, equals your profit. If you're on your own business, you can calculate how much profit you make with different products and services. This is accurate but time consuming. You could also average at the profits to find your profit margin. The profit margin is also a good metric to know if you're a marketer working for a client, they often won't want to give you super detailed reports of how much profit each sale created. But if you ask for their profit margin, you can still figure out how much profit you're creating for them based on the total income from sales. To find your profit margin, you'll divide your profit by your income and times that by 100. The profit margin is usually averaged out across products, and across time, an annual average is common. If you need to figure out how much profit your making for a client, you can reverse the calculation times your income by the profit margin and you'll get the total profit. But whatever not tracking sales when the value of your outcome isn't a cash number, you can use total conversion value as your profit number to do. This will define our conversions and decide on the conversion value. We've covered this earlier in scope and measurement, so if you blocked it out already, head back and rewatched that lesson if you need to, once we have our conversion value will track the number of conversions that our campaign or measurement scope created. Then we can simply multiply the number of conversions by the value of each conversion and get our total conversion value. This will be a stand in for the profit section of our calculations. So now we've learned how to calculate our prophet, define our profit margin and calculate our total conversion value. Next up will be defining r R Y investment.
6. Social Media Investment: in this lesson on social media are why we've already covered how to define our profit. Now it's time to figure out what counts is our investment. Defining our investment is Step two in R. R Y. Formula. Our investment isn't just how much money we put towards paid media ad spend. Everything that went into the work needs to be accounted for, and that includes man hours, software costs, subscriptions and more. Our investment can be broken up into three categories. Salaries, tools and spend. Salaries includes the cost of all humans, or your human resource is involved in the work. This is generally done on an hourly basis, So if your team isn't tracking the hours spent on different projects, you have no way of accurately counting the investment on any particular project. If you're a solo marketer, you definitely need to know the cost of your own time and at that, as your investment. Even if you're just promoting your own brand, your time is still valuable in needs to be accounted for under salaries. You'll also include freelancers and contractors, so your salaries could be internal or external tools are the bits and pieces it takes to get the work done. For social media marketers, software is usually a big expense as well. A subscriptions to stock sites, the cost of Internet and data, any equipment that has to be bought or rented like cameras and phones, travel expenses and, of course, snacks for meetings. Snacks should always be included in your budget you're spend will be the paid media costs how much money it took to get your content out there. If you're sponsoring or boosting your content, so looking at this list, you can see why you need to track your R Y across a big enough scope. Imagine calculating the itty bitty cost of each of these elements for a single Facebook post. You'd probably spend more time trying to hunt down the accurate investment numbers for a single post. Then you spent creating the post in the first place. So now we've got a good sense of how to define our social media investment. We can apply what we've learned through looking at a case study up. Next, we'll look through an example of a hair salon running a summer special and try to work out . There are a Y
7. Case Study 1: Becky's Hair Salon: welcome back to our lesson on social media are a Y. So far we've learned our ally formula and how to define our prophet investment. Now let's apply those skills to an example that will work through together. Though we've already practiced the social media R A y formula, this case study will give us a more realistic picture of what an average social media marketer has to deal with. Not only doing the formula but having to define the prophet and investment to Let's look at the story of Becky's hair salon and try to calculate her social media are a why this is Becky. She has good hair, so she's opened a hair salon. She's got a new summer special treatment she wants to promote on social media. This is a freelancer. He's not going camping. He just sleeps in the woods. Sometimes it's a lifestyle choice. Becky hires the freelancer to promote her new special. He charges her 10-K for his services and suggests that she puts another five K towards paid media. The campaign goes live and people start booking treatments. Once the campaign ends, Becky sees she made an income of 60 K from the campaign, but the treatment isn't free to do. Becky needs to pay for the treatment supplies, rent salaries of her hairdressers and overhead costs like water and lights. All her cost of goods comes to around 36 K We know our ally formula, but we can't start calculating it just yet. First, we need to define our prophet and our investment for the investment. We add up the freelancers fee with the paid media costs. So Becky's total investment was 15 K And how much profit did she make for this weaken minus her cost of goods from her income 60 minus 36 gives us 24 K profit. Now we're ready to calculate her R y. Let's start from the top and do each some in order. Step one is to define profit. We know she made 24. Step two is to define the investment, so she spent 15 altogether. Step three is the prophet, minus the investment which equals the net profit. So in our case, 24 minus 15 gives us nine, which is our net profit. Step four is our net profit, divided by our investment, which equals air decimal. So nine divided by 15 equals 0.6, and Step five is our decimal times 100 which equals R R Y percentage. So in our case, our decimal was your 1000.6 times 100 equals 60. So where are why? Total is 60%. Here's what the whole formula looks like with all these numbers plugged in. So Becky got a positive r Y from her campaign. Now that she has that number, she can use the R Y to see if her campaign was a success overall to see if he wants to hire that freelancer again, to compare to her other campaigns to decide what she'll do next year and to show her business partner, who has no idea about marketing what she did with the social media budget, proving that the campaign was a good idea and created value. So now we've seen social media are y in action? It's time to put our new skills to the test coming up. We've got a new case study for you to dive into
8. Case Study 2: Ramona's Flowers: in this lesson on social media are why we've seen how our formula can apply to real life marketing situations. For this case study, you'll have a chance to test our Y skills you've learned so far. Let's meet Ramona, who has a flower shop and gets a lot of orders through social media. Ramon is doing a quarterly R A Y review to see if her social media efforts have paid off. Over the last three months, Ramona's Flowers has the main goal of generating sales on social media. Over the quarter, Ramona spends 1000 on social Media Management software to help her schedule content. She spent 40 hours creating content and managing the community herself. Now, elsewhere in the business, her time is worth about 300 per hour, so the total time cost her 12,000 overall. She also hired a freelance designer for 2000 to help with designing a sale campaign, and she also spent about 5000 on Facebook ads. And over the quarter, the shop made 120,000 worth of sales from social media marketing. The cost of their stock delivery, packaging, wages and rent on those sales was about 40,000 altogether head over to exercise 2.2 in your workbook. All this information is reproduced there for you to go through. You can start following the five steps to figuring out Ramona's social media are y take your time and go through each step carefully. Once you're done calculating Ramona's are, why will do a quick assessment to check if you're on track, then we'll move on to finding our investment to return ratio.
9. Investment To Return Ratio: welcome to the final topic in our lesson on social media are a Y. Now you've got a solid sense of how to calculate and communicate your R Y. Here's another skill to help you showcase the value you're creating through social media marketing. The investment to return ratio sounds pretty scientific, but in reality it's one of the simplest ways to showcase value. If you've ever heard a phrase like this, you've seen this ratio in action for every $1 spent on marketing, we made $3. This is the investment to re Shia return at work. It's perfect for quickly communicating your R Y in a simple way that everyone in your business can understand. And the best part is, since you've already calculated your R y, and you know what your investment and profit numbers are, the hardest part is done. We just need to plug those numbers into a ratio. Again, calculators are allowed. Feel free to Google a ratio calculator to use here if you like me have blocked out all memories of maths class. So what you'll do to get your investment to return ratio is simply plug in your investment and your return numbers into a ratio and then simplify it. Then you can convert it to your currency. For example, our video campaign where we spend 5000 and made 15,000 can be simplified into a ratio of 1 to 3, which means for every $1 re spent, we got $3 back and for another example for Becky's hair salon. She spent 15 and made 24 so we can't simplify those numbers all the way down to one. But we can simplify them to 10. So for every $1 Becky spent, she actually got a dollar and 60 cents back. Now you've got that extra skill in your arsenal. Let's do our final exercise for exercise 2.3. You'll see a cheat sheet covering all the calculations we've talked about. In this lesson. You can use your cheat sheet toe work out the R A y of a recent campaign or month of content that you ran. If you don't have realized data you can use, you can always draft examples for yourself to practice, just like we did with our case studies. This will keep your skills fresh for the next time you need to showcase the value of your social media marketing efforts. And that's it for a lesson on social media. Are y Congrats on completing the entire lesson and thank you for choosing critical social.
Dasia Lutova, Social Media Trainer
