When we talk about profitability, we must understand that it is a process in which profits and benefits (income) are obtained from a certain investment. Therefore, profitability in social networks is nothing more than the economic gains that can be obtained from the use of social networks, as the main resource to disseminate attractive content to consumers.
Of course, behind each publication, there is an entire digital marketing strategy that incorporates the work of various specialists in the area. Everything that companies publish on their social networks is coldly calculated and is part of a much broader strategy in which time and money are invested to achieve it. Profitable content is one that allows the company to recover and even double the value of its investment in sales.
However, how can you measure sales and how can you measure interactions at the same time? Johana Cavalcanti and Juan Sobejano in their work: Social Media IOR: Relationships as a Currency of Profitability establish two ways to measure the profitability of your content on social networks by making a dichotomy between sales and relationships: ROI (Return of Investment) and the IOR (Impact of Relationship).
What is ROI?
The ROI (Return of Investment for its acronym in English and Retorno de la Inversión for its Spanish translation) is a formula that allows you to know the economic benefit obtained from an investment made.In other words, ROI allows companies to know their profit margin in relation to the performance of an applied marketing strategy. Specifically, it reveals the percentage of profit, through specific sales, that investors receive for their economic contribution.
Therefore, ROI represents a measure to know the profitability of a business and in the case of social networks, of a particular content. In digital marketing, ROI takes on a strong role, since if the return on investment generated by some strategies is not known, it would not be possible to correctly evaluate whether they are meeting the stated objectives.
How is ROI calculated?
Calculating the return on investment is essential to analyze the success of your marketing campaigns and the economic benefit (tangible elements) that you have obtained from it.
This conversion is very useful when it comes to paid ads. ROI can be calculated under a fairly simple mathematical rule:
The amount of the investment must be subtracted from the benefits and divided by the same amount invested. For example, if your company invests $2,000, through advertising on Instagram or Facebook Ads, in a certain piece of content and the profit is $10,000 (that is, that was the profit obtained from the sales generated by that content), the ROI It would be calculated as follows:
Number of customers acquired via paid ads: 4
Value of each sale: $2,500
Profit: $10,000
Investment: $2,000
ROI =10,000 – 2,000/ 2000
ROI = 4% (The value of ROI, being the quotient of two related magnitudes between yes, it is a ratio, so it is expressed as a percentage)
Based on the example, your ROI would be 4%. To know the percentage of benefits we multiply it by 100 and it gives us 400%. This means that with an ROI of 4% you have obtained 400% of the money invested, that is, for every dollar invested, you have earned $4. If the ROI is positive, that indicates that your strategy generated profit, if on the contrary, it is negative, that indicates a loss of investment, that is, that you were not able to recover the money you invested.
ROI works perfectly when it comes to paid content traffic, that is when businesses pay to appear on the major search engines Facebook, Instagram and Twitter. However, when it comes to organic positioning, Johana Cavalcanti and Juan Sobejano affirm that with the arrival of the Internet, accompanied by online marketing and e-commerce, monitoring sales made through virtual channels has become much simpler.
When a user performs an action or interaction with a website, a cookie (“mark”) is installed on their computer. If the user, with that “marked” computer, makes a conversion (purchase, reservation, form submission, etc.), web analytics tools such as Google Adwords/Analytics identify it, which makes it possible to know which action generated the sale. . By enabling the monitoring of each action, the ROI of each one can be calculated separately.
However, although ROI is an important indicator to measure the profitability of content on social networks (when it comes to sales), how to calculate the profitability of content that is created to generate engagement and not to generate transactions? The great dilemma that Johana Cavalcanti and Juan Sobejano raise in their book, based on the strong impact that relationship marketing and inbound marketing methodology has had in the business world, where relationships with customers are much more important than sales themselves, it’s about that. How can you calculate ROI in a non-commercial environment? How to calculate the return on investment of relationships and conversations (economic intangibles)?
Interactions on social networks as indicators of profitability
Within a business context, social networks are key platforms that organizations use to interact with their buyers and keep them informed of their products and/or services. These are media where dialogue and the exchange of knowledge occurs spontaneously. Unlike television or radio, where the “passive” role of buyers is more strongly limited.
In social networks this takes a 180-degree turn since it is the buyers who determine the direction of the digital marketing strategies carried out by companies, so that their content is more attractive, that is, it reaches a large number of “likes”, comments and shares. The data derived from these interactions is important to analyze how effective and profitable content is.
Therefore, the great challenge that companies have is to create web publications that convert social media followers into sales opportunities (one of the main objectives of the inbound marketing methodology ) to achieve precisely that profitability, regardless of Paid advertisements and the intervention of external channels.
While the ROI establishes the profitability of quantitative actions (such as the investment of an amount of money), the IOR, on the contrary, seeks to approximate the profitability of qualitative actions (such as the relationship and interaction that a company has with its customers through of their social networks ).
What is the IOR?
In this same order of ideas, The IOR (Impact of Relationship for its acronym in English and Impact of Relationships for its translation in Spanish) makes up a series of indicators that allow you to measure those variables that the ROI cannot quantify, as are the non-profit actions and relationships that occur on social networks, reciprocally and constantly with buyers.
To do this, the IOR establishes 4 variables that allow marketing specialists to create measurement scales to also know the profitability of that content because even though the objective is not to generate a sale in the short term, there was effort and time. behind dedicated to its creation, which is also important to give back in some way. Usually this form, more than expressed in a sale, is manifested in the promotion and dissemination of content on social networks (qualitative factors) by consumers.
These variables are: authority of the content shared by social networks, influence of the brand on social media, participation of followers in the brand profiles and traffic generated through the company’s presence on digital platforms.
How is IOR calculated?
To give rise to their theory, Johana Cavalcanti and Juan Sobejano created a range of values for each of the variables that intervene in the IOR. They claim that they are organized hierarchically from highest to lowest, that is, Authority is more important than influence, influence than participation, and participation than traffic. This is where the assignment of the following values to this measurement system derives :
Authority – 51 to 100 ior
Influence – 26 to 50 ior
Participation – 6 to 25 ior
Traffic – 1 to 5 IOR
Authority is measured by the number of times content is disseminated on social networks, by the number of times the brand is cited in articles, publications and news related to its value proposition, and by the number of times in which the brand is used as a success story in studies, publications and conferences.
In this variable, creating valuable content is essential because it allows you to generate these links with external sources. If the brand is cited in a recognized blog, a maximum score would be applied to that fact, that is, 100 IOR; if the blog, on the other hand, is of little relevance, a minimum score will be used, that is, 51 IOR.
On the other hand, influence is given by the number of followers a brand has on its different social networks. As it is the second most valuable variable, it is suggested as a standard range, between 26 and 50 IOR for each follower of the company. Influence can be assessed by:
- Number of blog subscribers per email
- Number of blog subscribers per RSS
- Number of fans on Facebook
- Number of followers on Twitter and Instagram
- Number of subscribers to the YouTube channel
Cavalcanti and Sobejano affirm that as well as authority, the importance of the medium must also be taken into account to apply the value to the calculation of the IOR . For blog subscribers by email (who already constitute sales opportunities as such), for example, the maximum score, 50 ior, would be applied, and for Twitter followers (simple content readers), the minimum, 26 ior.
In the case of participation, the most direct interactions that followers carry out with companies through comments and exchanges of opinions come into play. Participation can be calculated through:
- Comments on the blog
- Comments and ratings on the Facebook Fanpage
- Mentions, retweets and replies on Twitter
- Comments and ratings on YouTube
It should be noted that each company, depending on its business model and marketing objectives, can give priority to one channel over another, The values used by these authors are more than referential to understand the usefulness of the IOR to quantify the profitability of content on social networks.
Finally, traffic is measured by the number of visits that a website receives through the content published on social networks since websites are where companies can truly use their strategies to generate more specific sales, including in them virtual stores, download links, forms for obtaining databases, among other mechanisms that ultimately guarantee a return on investment.
Finally, To calculate an integral IOR that allows us to obtain a total value, the range of results obtained from each variable must be added. For example: if a company obtains in a week an authority of 100 ior, an influence of 30 ior, a participation of 10 ior and a traffic of 3 ior, in total the value that the sum of all these interactions would yield would be: 143 ior. If the calculation is done again the following week and the result is 220 ior, this means that the strategy used obtained great results.
ROI and IOR are two indicators that, despite having different focuses (obtaining short-term profits and customer loyalty), are not mutually exclusive; on the contrary, they complement each other perfectly when creating a comprehensive analysis of how profitable it is. a content on social networks.In fact, the IOR as an alternative indicator arises from the need to quantify other elements that are not considered variables in the ROI (such as the level of proximity to customers). However, as we have observed throughout the text, the IOR It makes way for ROI and together they work perfectly to measure the profitability of your sales and your relationships separately. They work like two puzzle pieces that separately fulfill a particular function but together, they create a magnificent symbiosis, in terms of obtaining data and measuring profitability.
