Internet marketers have declared social media the best thing since sliced bread. But measuring social media’s return of investment, or ROI, is a challenge for many business owners.

Some say social media is just too new to start gathering ROI data. Others say social media’s greatest value to businesses is its ability to create conversations, and it’s nearly impossible to track the ROI of those conversations over time.

So  how are businesses to know if their social media strategies are working? Is it really impossible to measure social media’s ROI?

In a word, no. Businesses can measure social media’s ROI, but it requires:

1. Setting specific goals for each level of customer interaction
2. Determining how to collect data, analyze it and identify correlations
3. Using that data to calculate ROI

Defining Social Media ROI

For many business owners, the goal is obvious: to improve sales. But sales can be generated in a wide number of ways.

Don Bartholomew of Fleishman-Hillard’s Digital Research Group has identified four ways that are particularly relevant to social media:

• By increasing brand exposure
• By deepening customer engagement
• By influencing customer behavior
• By getting customers to take action

He suggests several ways to track each method’s success. Exposure, for example, might be measured by web traffic, search engine rank and number of reader comments. Engagement can be measured by the duration of each visit and the number of return visitors. This image comes from Bartholomew’s blog post on the subject, “Social Media ROI Part 1: Framework:”

Once you understand how these factors can be tracked, you’ll be able to set specific goals. Because most people move through the four methods in a linear way – from increased brand exposure to the actual sale – you’ll get better results by setting goals for each level of interaction rather than just setting specific sales goals.

Other Forms Of Social Media ROI

One thing to keep in mind: When measuring the results of your social media marketing, don’t forget to factor in other forms of ROI. In addition to increasing sales, social media can reduce expenses by solving customer support issues and decreasing the need for other, more expensive forms of marketing. (Print advertisements and search engine optimization are two that come to mind.)

Like any form of marketing, social media marketing takes work. But with the right preparation, you’ll have an easy way to track the value it brings to your business.

Do you track your social media marketing efforts? Do you have statistics of your own? Share them in the comments section below.