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 for consumers.
Of course, behind each post, there is a whole 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 that which allows the company to recover and even double the value of its investment in sales.
However, how can sales and interactions be measured at the same time? Johana Cavalcanti and Juan Sobejano, in their work: Social Media IOR: Relationships as a Currency of Profitability, establish two ways of measuring the profitability of your content on social networks, creating a dichotomy between sales and relationships: ROI (Return of Investment) and IOR (Impact of Relationship).
What is ROI?
ROI (Return on Investment) 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 financial 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 importance, 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) you have obtained from them.
This conversion is very useful when it comes to paid ads. The ROI can be calculated under a fairly simple mathematical rule:
The amount of the investment must be subtracted from the profits and the result divided by the invested amount.For example, if your company invests $2,000, through advertising on Instagram or Facebook Ads, in a certain content and the profit is $10,000 (that is, that was the profit obtained from the sales generated by that content) the ROI 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 ROI value, being the quotient of two related magnitudes, is a ratio, so it is expressed as a percentage)
Based on the example, your ROI would be 4%. To find the percentage of profits, 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 the investment, that is, that you did not manage to recover the money you invested.
ROI works perfectly when it comes to paid content traffic, i.e. when companies pay to appear on major search engines Facebook, Instagram, and Twitter .However, when it comes to organic positioning, Johana Cavalcanti and Juan Sobejano claim that with the arrival of the Internet, accompanied by online marketing and e-commerce, monitoring sales made on virtual channels has become much simpler.
When a user performs an action or interaction with a website, a cookie (“flag”) is installed on their computer. If the user, with that “flagged” computer, performs a conversion (purchase, reservation, form submission, etc.), web analytics tools such as Google Adwords/Analytics identify it, making 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, even though ROI is an important indicator to measure the profitability of content on social networks (when it comes to sales), how do you 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 pose in their book, based on the strong impact that relational marketing and inbound marketing methodology have had in the business world, where relationships with customers are much more important than sales themselves, is about that. How can ROI be calculated in a non-commercial environment? How to calculate the return on investment of relationships and conversations (economic intangibles)?
Social media interactions as indicators of profitability
In a business context, social media are key platforms used by organizations to interact with their buyers and keep them informed about their products and/or services. These are communication media where dialogue and the exchange of knowledge occur spontaneously, unlike television or radio, where the “passive” role of buyers is more severely limited.
On social media , this takes a 180-degree turn, since it is the buyers who determine the direction of the digital marketing strategies that companies carry out, so that their content is more attractive, that is, reaches a large number of “likes”, comments and times shared. The data derived from these interactions is important to analyze how effective and profitable a content is.
Therefore, the great challenge for companies 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, without paid ads and the intervention of external channels.
While ROI establishes the profitability of quantitative actions (such as the investment of an amount of money), 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 its social networks ).
What is the IOR?
In this same order of ideas,The IOR (Impact of Relationship) is a series of indicators that allow you to measure those variables that the ROI cannot quantify,such as 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 short-term sale, there was effort and time behind it dedicated to its creation, which is also important to reward in some way.Usually, this form is expressed more in the promotion and dissemination of content on social networks (qualitative factors) by consumers than in a sale.
These variables are: authority of the content shared on social media, influence philippines telegram of the brand on social media, participation of followers in the brand's profiles and traffic generated through the company's presence on digital platforms.
IOR variables
How is IOR calculated?
Johana Cavalcanti and Juan Sobejano, to give rise to their theory, created a range of values for each of the variables involved in the IOR, which they claim are organized hierarchically from highest to lowest, that is,Authority is more important than influence, influence is more important than participation, and participation is more important than traffic.This is where the following values are assigned to this measurement system :
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 a piece of content is shared on social media, 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 the brand is used as a success story in studies, publications and conferences .
In this variable, creating valuable content is essential because it allows generating these links with external sources. If the brand is mentioned 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, the suggested standard range is between 26 and 50 IOR for each follower of the company. Influence can be assessed by:
Number of blog subscribers by email
Number of blog subscribers by RSS
Number of Facebook fans
Number of followers on Twitter and Instagram
Number of subscribers to the Youtube channel
Cavalcanti and Sobejano state that, just as with authority, the importance of the medium must also be taken into account when applying the value to the IOR calculation . For example, for blog subscribers by email (who already constitute sales opportunities as such), the maximum score would be 50 ior, and for Twitter followers (simple content readers), the minimum score would be 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: