Marketers want to know that they’re using their time efficiently. Nurturing leads is important, but it’s a delicate balance between how much you spend on each lead, versus how much revenue each lead could potentially bring in. You’re wondering if your efforts are worth the resources that you put into them, and it’s an important question to ask. In today’s highly digital world, it’s getting easier to track marketing campaigns, but knowing exactly what to look for can help companies know the effect that their marketing efforts are having on their bottom line.
What is Digital Marketing ROI?
ROI stands for return on investment, and digital marketing ROI is all about tracking the results of your marketing campaigns to see how cost-effective they actually are. As a marketer, your time and effort are valuable, so having statistics to back up the ROI of your marketing campaigns can let you know that you’re using your resources efficiently. You want to spend as little as you can to have the biggest impact possible.
There are different ways to track your ROI, but it’s necessary to keep in mind that the way you measure the success of your campaigns will depend on which marketing tactics you are using in your campaigns. Tracking and measuring social media campaigns is different from tracking and measuring email campaigns, and so on.
How to Measure Digital Marketing ROI
In order to effectively measure your digital marketing campaigns’ ROI, there are a few important terms to understand. Some of the terms below are KPIs (key performance indicators), and can help you track your progress.
- Marketing Funnel – a marketing model that guides your potential customer step by step through the buyer journey. Starting with the discovery of your brand, a marketing funnel guides them all the way to becoming a repeat customer. Drip emails are a tactic that many companies use in their marketing funnels.
- Conversion Rate – the rate at which your users take the desired action. In most cases, that action is making a purchase. For example, if you have 10,000 visitors to your website and 300 of them make a purchase, your conversion rate is 3%.
- Cost Per Lead – this metric can be helpful to determine exactly how you can best allocate your marketing budget. Find your cost per lead by taking the total cost of the campaign and then dividing it by the number of leads the campaign generated
- Lead Close Rate – similar to a conversion rate, this is the rate at which sales leads actually make purchases.
- Average Order Value – this is how you can track the average amount spent each time a customer places an order with you. To calculate your average order value, divide your total revenue by the number of orders that have been placed.
- Customer Lifetime Value- this metric is sometimes known as LTV. LTV is a prediction of the total amount of money a business can expect from a single customer over time. It may be helpful to measure LTV versus the cost of customer acquisition, so you can know how long it will take to make back your return on investment.
- Conversion Rate Optimization – optimizing your conversion rate involves working to increase the percentage of website visitors that take the desired action. You can modify parts of your website to increase the chances that site visitors will convert into a lead or sale.
ROI Depends On Digital Marketing Tactics
Before you can decide which metrics are the most effective for tracking your campaign, take a look at which marketing tactics you’re using. For example, if you’re trying to track the success and measure the ROI of an email campaign, it’s important to take a look at the email itself. What was the open rate, the click-through rate, and the bounce rate? Did anyone unsubscribe from your email list? Where there any conversions or any leads acquired?
When looking at a social media campaign, you can specifically track the engagement rates of your post (i.e. likes, shares, comments). How many people clicked on your link? Did any of them convert? You can also count if you acquired any new followers.
Landing pages are a little different. Using a tool like Google Analytics, you can track the traffic to your site and see how many of them were unique vs returning visitors. How many people are viewing your pages, and how much time are they spending on your site? How do people flow through your site? Track what actions they take while on your site, and how many conversions were made.
When it comes to blogs, like websites, you’ll want to take a look at metrics like traffic, links clicked, time spent on each post or page, unique and returning visitors, actions that are taken, and conversions.
When tracking these metrics, looking at long term trends can be helpful. If you compare your data from month to month, it might not take into account holidays, seasonal fluctuations, or other factors. Tracking your data and comparing it year to year can give you a clearer picture of what’s going on overall.
Four Ways to Improve Your Digital Marketing ROI
- Clearly identify your goals early on. When you know exactly what you’re aiming for, it’s easier to track your progress and know when you’ve reached your final goal.
- Use KPIs that are directly related to your goals. As mentioned above, which metrics you use to track your ROI should depend on your goals and which marketing tactics you’re using.
- Test different targeting, offers, frequency, and messaging. In order to find the most effective use of your time and budget, it may take a little experimentation. Try switching up which demographic you’re targeting, what you’re offering them, and how and when you’re contacting them. Eventually, you’ll find a formula that works well.
- Identify and seize important opportunities for improvement. If your marketing strategy isn’t getting you the ROI you’re hoping for, it’s important to identify exactly what is causing the problem. And don’t forget to keep in mind that technology is always changing, so staying on top of trends is key.
Finding the right balance in your digital marketing strategy can be tough. You want your ROI to be as high as possible, so use the key performance indicators and tips above to find out exactly how your strategy measures up.