All Things Digital


How Tracking Your ROI Can Optimize Your Digital Marketing

ROI is not a foreign acronym to any CEO. If you invest money in an initiative, you have to know whether or not it actually performs up to expectations before you choose to invest again. The same is increasingly true for marketing.

Simply put, it’s no longer enough to throw some money at promotions and hope for the best. Maybe it never was enough. But today, more emphasis than ever has to lie on proving the success of your marketing initiatives.

That’s often easier said than done. It can be difficult to tie tangible business results to a Facebook post or search marketing campaign. Still, you can come close. Use this guide to track and optimize your digital marketing ROI over time.

What is Digital Marketing ROI?

Marketing ROI follows the general definition for return on investment:

ROI tries to directly measure the amount of return on a particular investment, relative to the investment’s cost. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment. The result is expressed as a percentage or a ratio.

Of course, that’s difficult to do in an environment where the return is not always obvious. For example, entering new markets is impossible without building brand awareness. At the same time, it’s almost impossible to measure brand awareness.

That’s why, in digital marketing, ROI is often an approximation. It seems to get a close estimate of the actual return, in lieu of the return itself. To get to that point, you have to understand the concept from a funnel perspective.

Understanding Digital ROI in the Marketing Funnel Context

Most marketing prospects follow a relatively linear sales funnel. They go from learning about your brand to becoming interested, becoming an active lead, and eventually sales-ready. Only then do they convert to customers and contribute to your actual revenue.

For digital marketing, all of these “in-between” conversions matter. Each of them, in their own way, shows and proves ROI. That’s what makes the metrics you can track to show that return so crucial to the larger process

6 Metrics to Track Your Digital Marketing ROI

Stay away from vanity metrics. Numbers like ad impressions or likes on your Facebook page are not true key performance indicators, and don’t matter much when it comes to the big picture. All they do is make your marketers look good. Instead, look for the metrics that actually suggest real dollar amounts for your company:

1) Conversion Rate

How many of your website visitors actually become leads? This metric becomes absolutely crucial in measuring your marketing ROI. Your team can also trace it back to individual ads, so you know exactly which of your marketing campaigns perform best in turning members of your target audience into database prospects.

2) Cost per Lead

Conversion rate only matters, of course, in the context of cost. This is the investment part of the ROI equation. Your cost per lead tells you how much your company needed to spend to generate a prospect. Again, you can break it down by individual campaigns and channels as needed.

3) Lead Close Rate

Think of it as a conversion rate, just for your leads turning customers. Leads that close at higher rates are worth investigating further. Your lead close rates give you a great idea of which of your mid-funnel marketing initiatives work best from an ROI perspective.

4) Cost per Acquisition

It’s to lead close rate what cost per lead is to your conversion rate. Each time you close a lead, how much does your company have to spend? Pay close attention to how this number differs from channel to channel. Naturally, you have to make sure that your CPA stays as low as possible.

5) Average Order Value

A more valuable order, one that comes with higher initial return or a longer-term investment, is naturally worth more and even deserves a higher cost per acquisition. Look to maximize your order value for optimum marketing ROI.

6) Customer Lifetime Value

Finally, never make the mistake of focusing only on the initial conversion. The best marketing initiatives don’t generate one-time, but loyal long-term customers. Customer Lifetime Value takes the average order value, and multiplies it by the average number of orders. What you get is the number one return calculation available to digital marketers.

How to Build Your Metrics into a Coherent ROI Equation

All of the above are important. None of them should be considered in isolation. Instead, use all of them to build an ROI equation. That’s not a simple task, and one that will require thoughts and time from both your marketing and analytics teams. Get as close as possible to comprehensive views of both the investment and return parts of the equation.

4 Ways to Improve Your Digital Marketing ROI

Ready for more specifics? Let’s go. First, pay special attention to conversion rate optimization. It’s your best bet of making sure that your marketing tactics don’t just draw attention, but actually convert that attention into tangible results. Then, consider these 4 more comprehensive ways to improve your digital marketing ROI.

1) Start With Your Goals

The earlier you set your marketing goals, the better. ideally, these goals connect directly to your larger business objectives, which makes it easier to track your ROI using the next steps below.

2) Match Your KPIs to Your Goals

Next, select KPIs from the metrics above to get as close as possible toyour goals. For a mature company, retention (and lifetime value) might be most important. New leads probably matter more if your company is still in high growth mode. Either way, your KPIs have to match your goals to make sure you get to positive ROI.

3) Test Your Tactics Based on Set KPIs

Once you know your KPIs, leverage them to constantly test your individual marketing. Your teams should be running tests on anything from channel variations to audience changes, and even the creative. That way, you can make sure that you always find the tactics generating the most ROI.

4) Never Stop Improving Your Marketing

Finally, when it comes to marketing ROI, it’s crucial to embrace a continuous improvement mindset. Simply put, you have to make sure that optimization is at the forefront of everyone on the team. On both a micro and a macro level, that means continually refining goals, metrics, and tactics as needed.

Are You Ready to Optimize Your Marketing Spend?

ROI means finding the best possible marketing strategy and tactics for your business. It also means knowing exactly how much you should spend on marketing to be successful. These are two sides of the same coin; are you ready for both? Contact us to learn more about your services, and how we can help you measure and achieve optimal digital marketing ROI.