When it comes to digital marketing, we often put a lot of thought into things like “viral content” and “engagement.” Though these industry buzzwords can be tempting to focus on, the truth is that these elements of digital marketing don’t really tell the whole story.
These metrics can’t give you a clear picture of how the time, money, and effort you put into your brand’s digital marketing efforts impact your company’s bottom line.
Below, we’ll dive deeper into what digital marketing ROI is and how you can measure it for your own business. We’ll also provide a quick list of helpful, actionable tips that you can use to improve your return on investment over time.
What is Digital Marketing ROI?
Digital marketing ROI is the measure of the profit or loss that you generate on your digital marketing campaigns, based on the amount of money you have invested.
In other words, this measurement tells you whether you’re getting your money’s worth from your marketing campaigns. If you have a positive return on investment, it means that your campaigns are bringing in more money than you are spending on them.
Demonstrating digital marketing ROI is important because without measuring this, you are essentially marketing blind.
What we mean by this is that if you do not measure the success of your campaigns over time, then you won’t know what’s working and what isn’t.
And if you don’t measure the ROI of your campaigns, you won’t know for sure if you’re wasting money or spending your digital marketing budget wisely.
Measuring digital marketing ROI is also important from an improvement standpoint. Once you can identify which areas are not performing as well as you hoped, you can work on analyzing these aspects of your campaigns and taking actionable steps toward improvement.
Knowing the ROI of different aspects of your campaigns helps you better understand where you should be allocating your marketing budget for the best results.
How to Measure Digital Marketing ROI
Determining your digital marketing ROI isn’t as easy as just looking at how much money different campaigns bring in and then comparing it to the cost.
Not all campaigns have an end goal of conversion.
Some campaigns are meant to build awareness. Ultimately, how to measure digital marketing ROI will depend on what your unique goals are. There is so much data available to you on Google Analytics that it might make your head spin.
That’s why we’ve put together a list of the most common digital marketing metrics used to help you measure ROI:
- Conversion Rate
Conversion rate is one of the most popular metrics used to track return on investment over time. If the goal of your marketing campaigns is to convert, then conversion metrics will tell you how well you are accomplishing this goal.
This then tells you what you are doing well and where you can allocate your resources for better results and improved return on investment.
- Cost per Lead
If the goal of your digital marketing campaign is to collect new leads for your sales team to close, then you need to measure how much you are paying for each new lead. This will help you determine what your return on investment is for that particular campaign.
- Lead Close Rate
It’s also important to monitor your lead close rate. This is something you may already be doing on your own. But there’s a good chance that this information isn’t being integrated into the online analytics you collect.
- Cost per Acquisition
Your cost per acquisition tells you how much it costs on average to acquire a new customer. To calculate cost per acquisition, divide your total marketing costs by the number of sales generated.
- Average Order Value
Average order value (AOV) is another important metric that can help you better understand your digital marketing ROI. This metric tracks the average dollar amount that’s spent when a customer places an order. To calculate AOV, you’ll divide the total revenue by the number of orders.
- Customer Lifetime Value
Customer lifetime value is a vital measurement for understanding your digital marketing ROI. This metric tells you what the average consumer will spend over their lifetime as a customer.
Though initial customer acquisition costs are important, using this metric as well will allow you to get a better understanding of a customer’s overall value.
4 Ways to Improve Your Digital Marketing ROI
Once you start measuring your digital marketing ROI, you can begin to look for areas of improvement. Below are just a few tips for improving your ability to both measure ROI and boost your company’s bottom line:
- Clearly identify your goals early on.
As we mentioned above in the ROI measurement section, you need to know what the goals of your campaign are before you can begin to measure digital marketing ROI. If your goals are unclear, then there’s a good chance that you might not be using the right metrics to track your ROI.
Avoid vague and loosely defined goals such as “increase awareness” or “create more conversions.” Instead, make sure that your goals are SMART – specific, measurable, achievable, relevant, and time-bound.
- Use KPIs that are directly related to your goals.
Once you have clearly defined goals and objectives in place, you need to make sure that you’re choosing KPIs that align with these goals. KPIs, or key performance indicators, are the key metrics or ways that you measure your progress toward these goals. KPIs for SEO will be different from KPIs for email marketing or social. If you don’t have KPIs in place, you have no way of knowing how close you are to reaching these goals.
- Test different targeting, offers, frequency, and messaging.
Testing is a vital part of improving your digital marketing ROI. Not only does it help you improve the performance of individual digital marketing campaigns, but it can also help you discover new insights that can be applied to your broader digital marketing strategy.
The only way to know for sure which elements of your digital marketing campaigns are impacting your success is to test them.
- Identify and seize important opportunities for improvement.
It’s not just enough to track your chosen metrics over time. If you really want to improve ROI, you’ve got to adjust your campaigns based on what you find. The data itself is not the most important part of your digital marketing campaign measurements. It’s the vital insights that you gain by looking at an analyzing this data that will help you grow your brand.
Once you’ve done some experimenting and have continued to track measurements over time, you will start to notice some trends or areas of opportunity. It’s imperative that you seize these opportunities to improve. Perform new tests based on what you find to continuously find new ways to make your campaigns even better than before.
Some other factors you might look at when analyzing your data and looking for new opportunities in the different channels that you’re using for campaigns as well as the time of day or day of the week that people tend to convert. Keeping an eye on these elements will help you better optimize when you publish content marketing or launch ads as part of your digital marketing campaigns.