Are you allocating your marketing budget effectively? Are you getting the most out of your marketing efforts? Tracking your ROI (return on investment) in digital marketing is an essential tool for your marketing strategy. It enables you to determine what's working and what needs changing in order to improve results and grow your business. Tracking ROI lets you know if the time, money and effort you put into marketing have a positive effect on your company's bottom line.
What is digital marketing ROI?
Digital marketing return on investment refers to the profit or loss that you generate on your digital marketing campaigns. A positive return indicates that your campaign is bringing in more money than you spent. Digital marketers generally aim for an average ROI of 5:1. $5 gained for every $1 spent. An ROI below 2:1 is not profitable and indicates that your marketing strategy needs work. Measuring marketing ROI allows you to understand how profitable each of your campaigns is and which marketing channels bring the best results. Remember that marketing ROI isn't always about the money a campaign generates. Some campaigns are about building awareness or getting customers into the marketing funnel. How you measure ROI will depend upon your goals.
Why measure ROI in marketing?
By measuring marketing ROI, you're able to see how each campaign is performing in terms of specific metrics that are important for your business. You can measure the results of a campaign in terms of leads, page views, sales and social media followers. If you fail to measure ROI, you may be unaware of what is working and what is not. Analyzing results enables you to calculate growth potential and take actionable steps toward improvement. It assists in determining which marketing strategies are worth additional investment and helps spot underperforming campaigns that require adjustments. Examining ROI facilitates the identification of successes and points out failures.
How do you measure digital marketing ROI?
To determine your ROI, you must first identify your key performance indicators (KPI's), the metrics that you wish to use to determine whether a channel or campaign is successful. The KPI's you choose will be determined by the goals of your strategy, program, channel or campaign. There are a number of common digital marketing metrics that are used for ROI analysis.
- Conversion rate is one of the most popular metrics used to track ROI. If the goal of your campaign is to convert visitors into leads or customers, this metric helps you see whether your campaign is accomplishing the goal. Consider tracking conversion rates by device.
- Cost per lead: If the goal of the campaign is to collect new leads, measure how much you are paying for each lead. If the cost of each lead is more than what you can produce when closing that lead, then you're not getting a positive return on investment.
- Lead close rate tells you the percentage of leads that actually convert to sales and informs you of the quality of the leads your marketing team hands over to the sales team as well as how effective your sales team is at closing leads.
- Cost per acquisition tells you the average cost to acquire a new customer. If you're spending more to acquire a customer than they bring into your company, you have a negative return on investment signalling that you need to revisit your marketing campaigns.
- Average order value tracks the average dollar amount that's spent when a customer places an order. Improving AOV can be as simple as providing a better user experience and more effectively showcasing up-sell or cross-sell opportunities.
- Customer lifetime value tells you what the average consumer will spend over their lifetime as a customer. Using this metric allows you to get a better understanding of a customer's overall value. Looking beyond the first purchase and seeing the long-term profit yields a more accurate ROI.
- Unique monthly visitors measure how many people clicked through to your website in a month. This metric can be segmented by traffic sources, such as organic, paid or social.
- Branded search lift looks at how many people searched specifically for your brand. It's a great metric to use when measuring the increase of awareness for your brand.
- Average position measures your search result page ranking for your targeted keywords. The higher your ranking, the more clicks, revenue and ROI to your website.
- Non-brand click-through rate gives you insights into how well your SEO strategies performed.
Which metrics should I use to measure my campaign?
The metrics you use depend on which tactics you're using in your campaign. The metrics used to measure an email campaign are not the same as those used for social media. Below is a list of metrics to use based on the tactics you employ.
- Email campaigns: Open rate, click-through rate, bounce rate, unsubscribe rate, conversions, leads acquired.
- Social media campaigns: Engagement rates, clicks and click-through rate, conversions, leads acquired, new fans or followers.
- Landing pages: Traffic, unique visitors, returning visitors, total page views, time spent on a page, actions taken, conversions.
- Blogs: Traffic, clicks, time spent on a page, unique visitors, returning visitors, actions are taken, conversions.
How do I improve digital marketing ROI?
Following are some ways you can improve your marketing ROI.
- Identify and define your goals, as this allows you to achieve objective results. If your goals are unclear, there's a greater possibility that you won't deploy accurate metrics to monitor your ROI. Make your goals SMART (specific, measurable, achievable, relevant, and time-bound).
- Measure the effectiveness of core metrics (sales, leads and traffic) to determine their impact on your revenues.
- Experiment with different marketing channels to determine the ones that lead to the highest ROI (email, direct response, social media, video marketing, paid ads). The performance of your campaigns will help determine the channels that your target customers respond to.
- Implement A/B testing across all campaigns testing copy, graphics, navigation links, calls to action and colours to determine what changes are successful. Change one element of a campaign and compare its performance to another. The key is to test variations one by one.
- Focus on your ad spend and income to uncover areas where you are spending too much for poor returns. You can discover how your channels are performing by comparing conversion rate, leads and profits generated.
- Don't dwell on one metric: Finding the right messaging, audience fit, and content is a process of trial and error. ROI is not the only metric that you can rely on to gain intel about your performance. Use additional metrics to build a comprehensive understanding of your marketing strategy.
- Use automation tools, as analyzing marketing results is a labour-intensive process. Marketing automation tools relieve the burden of manual and highly repetitive tasks. You can save time on email automation, data scraping, content customization, lead tracking and audience segmentation. The right tool enables you to identify your audience and automatically generate necessary actions based on acquired information.
- Think long-term value and invest in content marketing and email marketing. They require more work initially, but the payoff is greater. Results compound over time increasing your marketing ROI.
ROI is a simple, reliable metric that is used to test new marketing ideas, improve weak campaigns and build on methods that proved themselves. Track, measure, analyze and improve your digital marketing ROI. Optimizing your marketing processes is important to finding winning campaigns that have significant results on your bottom line. Establish specific key performance indicators (KPIs) for all your campaigns. Be open to using additional metrics that can provide valuable insights into your performance. Experiment and test. You'll achieve clarity on what's working, where you need improvement and what strategies you should be pursuing aggressively.
Want assistance measuring your digital marketing ROI? Need help with your marketing strategies? Call CAYK at (403) 456-0072 or email [email protected]. Allow us to be your very own marketing department! Connect with our tightly-knit team of knowledgeable digital-first consultants, each eager to help your business grow. Contact CAYK today.