Sanka Academy

Social Media ROI - How to justify the spend


Last Update: April 15, 2023

What you will get from this article:

  • Understand about ROI, LTV, and Community Management
  • Learn how to measure Social Media ROI, LTV, and Community Management
  • Discover the benefits and best practical use of ROI, LTV, and Community Management for your social media


You've heard the term "Social Media ROI" buzzed around, but what does it actually mean?

How about LTV and community management are all buzzwords in the world of social media? What do they mean?

ROI stands for Return on Investment, a measure used to evaluate the profitability of an investment by comparing the gains or returns from the investment to the cost of the investment.

In terms of social media, Social Media ROI is a measure of how much money your company makes from its social media efforts.

It's calculated by taking the total revenue generated by your social media channels and dividing it by the amount spent on those channels (including salaries, software, and other expenses).

This gives you a percentage that shows the effectiveness of your social media strategy and whether it is worth the investment.

While LTV stands for Lifetime Value: it's an estimate of how much money a customer will spend with you over their lifetime with you.

For example, if someone buys gaming accessories from Amazon but then orders more accessories next month because he loves them so much...then his LTV would be higher than someone who bought just one accessory without returning again later!

Another essential thing for justifying social media is Community Management.

It plays a critical role in justifying social media Return on Investment (ROI) by leveraging the power of community engagement and fostering positive relationships with customers or followers.

Integrating your community into other parts of your business or organization is a great way to deliver a better experience and as a result, engagement tends to go up.

The Benefits of Social Media ROI

Social media ROI is the most important metric for marketers to measure. It's also one of the most difficult to calculate, but it's worth it because social media has such a huge impact on your business.

Social media ROI can be beneficial in many ways:

  • Increase Brand Awareness: If you're using social media correctly, you should see an increase in brand awareness and recognition.
  • Generate Leads: Social media allows businesses access to leads that would otherwise be inaccessible through traditional means like advertising or cold calling.
  • Improve Customer Insights: By tracking social media metrics, businesses can identify which types of content are resonating with customers, and which customer segments are engaging with their brand.
  • Competitive Advantage: By tracking social media metrics, businesses can benchmark their social media performance against industry standards and competitors, and use this information to improve their social media strategy.
  • Increase ROI: By measuring the impact of social media on business goals, businesses can identify which social media channels and content types are driving the most value, and allocate resources accordingly.

    Social media management like Sanka provides depth analytics to help optimize your social media strategy over time and improve its ROI through increased engagement, leads, and sales.

The Benefits of Social Media LTV

First, LTV is a great way to understand what your customers are worth.

It allows you to see how much revenue each customer brings in, and how long they stay with your brand.

This will help you identify the best customers for your business so that you can focus on retaining them and turning them into repeat buyers.

Second, it helps ensure that your marketing efforts are focused on the right target audience who have shown an interest in purchasing from you before they actually do so.

Needless to say that the process that guides someone from a stranger to a customer is one of the most important things in marketing.

By understanding and analyzing the LTV, you can track and retarget the customer as leveraging retargeting can boost your sale up to 50%.

The Benefits of Community Management

Here are some of the benefits of having Community Management for your business.

  • Builds trust and loyalty through social media: Building a strong community of loyal followers on social media can have a significant impact on brand loyalty.

    And loyal followers tend to have higher lifetime value and are more likely to repurchase from the brand, positively impacting the bottom line and justifying the social media ROI.

    Community management efforts, such as facilitating discussions, hosting Q&A sessions, and offering exclusive promotions, can foster a sense of belonging and loyalty among community members.

  • Increase engagement: Effective community management can boost engagement on social media platforms, such as likes, comments, shares, and mentions which potentially lead to higher brand awareness and potential conversions.

    Try to post new things daily so there's always something fresh on your social media, share relevant news stories from around town, answer questions from followers using hashtags like #AskUsAnything, host contests where users submit photos/videos/stories, etc., to boost your engagement.

    Higher engagement metrics can serve as tactile evidence of the impact of community management efforts, justifying the ROI.

Data-driven Insights: Community management can gather valuable data and insights from social media communities, such as feedback, preferences, trends, and sentiment analysis.

By monitoring their responses and feedback, you will gain better insights into what content or products may be relevant and interesting for them.

If you want to have a unified profile or your member across the digital channels. With community management, you can measure ROI and the value of the community a lot more easily.

Also when your members are struggling, you can resolve them a lot more quickly because you have a better understanding of them.

You may connect your community channels with other applications like online forms, survey tools, and other handy tools to gather audiences' insights.

Measuring Social Media ROI

The first step in measuring the ROI of social media is to calculate your return on ad spend (ROAS).

This can be done by dividing your total revenue generated by your total cost of advertising.

For example, if you spent $100 and made $200 in sales, then your ROAS would be 2x ($200/$100).

Your next step is tracking conversion rate--the percentage of people who saw or clicked on an ad and then went on to make a purchase or take some other action that benefits you.

Finally, measure engagement using tools like Google Analytics or Facebook Insights so that you know how many people are interacting with posts on each platform and what kind of content performs best at driving engagement (and therefore sales).

Measuring Social Media LTV

To measure LTV, you need to know your average customer lifetime value (ACLV).

This is the amount of money a customer will spend with your brand over their entire relationship with you.

To calculate ACLV:

Calculate the total revenue generated by each customer during their lifetime.

For example, if someone spends $100 on their first order and then $200 on their second order, then their ACLV would be ($100 + $200)/2 = $150.

Calculate how many months it takes for them to make another purchase after they've made one purchase from you.

In this case, our example customer makes another purchase after three months; therefore we can say that it took three months for them to become repeat buyers and thus have an ACLV of 3 months/$150 = 20%.

Measuring Community Management

  • Track Engagement Rate: The engagement rate is the highest level of interaction that you can get with your community.

    It's calculated by dividing the number of followers who have interacted with your account in some way by the total number of followers.

    For example, if you have 100 followers and 10 people like one post, then your engagement rate would be 10%.

  • Analyze User Satisfaction: You can measure user satisfaction by looking at how many people are engaging with your content and what kind of comments they leave behind.

    If someone leaves a positive comment on one of your posts, then it means he or she was satisfied with what he saw!

Monitor Sentiment Analysis: This type of analysis helps determine whether users are talking positively or negatively about something--like an ad campaign or product launch--based on keywords used within their posts (or even those found in comments).

Best Practices for Social Media ROI

The most important thing to do is optimize your ads. It's no secret that Facebook, Instagram, and Twitter have been working hard to make their platforms more user-friendly for businesses.

If you don't take advantage of these features, you're missing out on opportunities to increase engagement and conversions.

With this in mind, here are some best practices for social media ROI:

  • Optimize your ads - Social media advertising can be extremely effective when done right.

    Make sure you're using relevant images that drive home the message of what it is you're selling or promoting.

    Also, consider there's enough text so users know exactly what they'll get if they click on one of your posts.

  • Leverage influencers - Influencers are great because they already have large followers who trust them wholeheartedly, so when those people recommend something (like an app), chances are high that those followers will try whatever product/service has been recommended by someone whom they admire greatly.


Social Media ROI, LTV, and Community Management are important concepts in the world of social media marketing.

Understanding and leveraging the concepts of Social Media ROI, LTV, and Community Management can help businesses optimize their social media strategy, improve their bottom line, and build strong relationships with their audience.

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