How to measure Digital Marketing ROI?

how to measure digital marketing roi

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Digital Marketing is the buzzword in the professional world. The reason is simple. People are using the internet and Smartphone to execute several activities. The online activity of the people has multiplied which forces the companies to make their web presence strong. Thus they have to indulge in Digital marketing campaigns and strategies to hit the target audience in a correct manner. Moreover, the communication with the consumer is direct in Social Media platforms. Thus it is important to take note of the result or Return on Investment (ROI)to measure the digital marketing efforts and campaigns. This reveals the fact that is the money spent on such marketing activities fruitful or not? It is possible to effectively measure the ROI on digital marketing campaigns.

The most correct way to analyze the success of digital marketing campaigns is to track metrics. Though it sounds very simple, yet the canvas is not white. There are different kinds of companies which market their products and services in the online platforms. While measuring the ROI for e-commerce site can be simple; the same cannot be said about a firm which markets services, or other B2B industries where they aren’t really dealing with the consumers directly. The task is challenging but not impossible.

To understand the exact working of ROI for digital marketing campaigns, it is important to identify the goals of the companies. Thus they need to look at the Key Performance Indicators or KPI which are of different types:

  • General performance:
  1. Leads
  2. Traffic
  3. Reach
  • Channel-Based Performance:
  1. Websites
  2. Blogs
  3. Social Media
  4. Search Engines
  • Performance Based on Source:
  1. Organic Search
  2. Direct Traffic
  3. Email
  4. Referrals
  5. PPC
  • Campaign Based performance:
  1. Click Through Rate
  2. Lead Generation
  3. Conversion
  • Set Realistic Goals

There are basic metrics which makes the task of measuring Digital Marketing ROI possible.

Metrics to measure Digital Marketing ROI

  • Conversion Rate

The company which has made it to the World Wide Web and has employed various channels for the promotional strategy, then they would like to know where the traffic is coming from. They would like to know whether it is generated through paid or organic means, through social media platforms, or other avenues. This information is most critical as it will reveal the fact and they will get to know about the best medium to devote time and make an investment for marketing efforts. Thus they can withdraw the attention from the inactive audience to the interactive one and to increase ROI.

  • Cost Per lead

In case the digital marketing plan has been designed to generate new leads for the sales team to close, then it is essential to have a clear idea about the expense to acquire a new lead. This will be helpful in determining the ROI on the marketing plan. If the amount spent on acquiring the new lead is higher, then the plan definitely requires to be reviewed.

The formula to calculate the Cost per Lead or CPL is

                                     Total Ad Spent

                CPL  =            ____________

                                Total Attributed Leads

  • Lead to close ratio

The total number of leads divided by the number of leads which have been closed reveals the lead to close ratio. This helps in measuring the sales efficiency of the promotional strategy. Keeping a close eye on the LTCR will help to access the success of the marketing plan which will, in turn, contribute to ROI on the digital marketing plan. If the leads close at a lower rate, it is indicative of making adjustments in the plan.

  • Cost Per Acquisition

This reveals the amount required to acquire a new customer, not only a lead. This can be easily accessed by dividing total marketing costs by the number of sales generated.

                      Total Ad Spent

CPA  =         ——————–

                Total Attributed Conversions

When the companies know the amount required shelling out in order to acquire a new customer, then they can easily understand the ROI. The graph will reflect a negative ROI if the cost required for acquiring a new customer is higher. This means that there is a requirement to adjust the marketing plan and look for methods/ways to bring down the CPA.

  • Average Order value ( AOV )

This is one more important metric which can help in the determination of the Digital Marketing ROI. It is most useful form of measuring ROI for the E-commerce companies but even B2B companies can make use of the same.  The best means to calculate AOV is by dividing the total revenue by the number of orders generated by a campaign. Every company/business wants to witness the growth in the number of orders, it is also significant to be attentive to gauge the average value of each order. Even a small increase in the average value of an order will generate good revenue. The E-commerce firms can easily get the real picture by multiplying the AOV by the repeat rate of the order. This is quite an accurate metric.

  • Customer Lifetime Value ( CLV )

This is a vital metric to understand the Digital Marketing ROI. What the average customers spends in their lifetime is a trivial question for the companies to understand. Though the initial marketing strategy can load the expense list, yet if it brings consistent and long term profits, then the initial cost is worth the price and the wait. It gives a new perspective on the initial investment or acquisition cost.

  • Landing Page Performance

When websites are designed, the companies often worry about the visits which the sites can generate. People are worried about bounce rates, CTR, conversion rates, etc. If the Landing Page is not generating the expected results, then definitely fixing it is required. In such cases, it is simple to measure the ROI through the visits which the Landing Page gets.

Tips to Improve Digital Marketing ROI

Once the measurement of the Digital Marketing ROI has begun, there are ways to improve the same. Following are some of the tips which can improve the ROI on Digital marketing campaigns:

  • Identification of the goals:

If the company is not having clarity about their goals, they cannot yield desirable results and neither can they invest the right metric to find the ROI. The goals should not be vague. It should be clearly defined. The goal should be Smart/Specific, Measurable, Achievable, Relevant, and Time-Bound. This sums ups the goal identification easily. It should have all the above-mentioned qualities.

  • KPIs should be relevant to the goals

Make a choice of the Key Performance Indicators or KPIs which are aligned with the goals. KPIs also differ as per the platform. It may be different for email marketing, social media, or SEO. If the goal is to increase the conversions then the metrics which makes the realization of the sales should be employed.

  • Identify and employ the right opportunity for improvement of ROI

Making the selection of the right metric is not enough. It is also important to review and keep making adjustments with time.

Take away:

The best way to measure the digital marketing ROI is to identify the changing situations and keep making adjustments based on the findings, insights, and data. In this way, the metric also become successful.


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