Digital marketing and its associated success and ROI indicators are changing at a breakneck pace.
The digital transition has moved years ahead of schedule in recent years (due to COVID-19).
Any marketer who has dabbled in Google Analytics will say that the sheer number of data access may be intimidating.
It’s critical that you’ve established the essential indicators you want to follow in order to cut through the noise and effectively analyze the ROI of your digital marketing efforts.
This article will provide you with 15 critical indicators to help you assess the ROI of your digital marketing efforts, inform you whether your efforts are effective, and show you where improvements may be required.
Running a business can be expensive, so if you’re going to spend money on marketing strategies, you want to make sure that you’re getting as much of your money back as possible in the form of a return on investment. If you aren’t familiar with return on investment (ROI), this guide will teach you what ROI means and how it affects the performance of your marketing campaigns. We’ll also explain how to get a high ROI out of digital marketing and help you decide what kinds of investments work best for your business.
Key Strategies to Enhance your Digital Marketing ROI
Define what ROI means for your business
ROI stands for return on investment, and it’s one of the most important metrics for any business. The best way to calculate your ROI is by using a digital marketing ROI formula. This formula takes into account the return on spending and revenue generated by your campaign. You should also consider how much your advertising costs, the total number of leads generated, the quality of those leads, and how many sales were made as a result.
Set specific goals for your digital marketing campaigns.
Digital marketing should be a part of any company’s communication strategy. The right marketing campaign can help companies increase visibility, promote products, and build brand awareness. However, it’s important to measure your digital marketing ROI so you know which campaigns are worth investing in and which ones are not. Use this digital marketing ROI formula for a better understanding of how much you should invest in your digital marketing campaigns.
First, calculate the total value (TV) by multiplying your average sales by the current price per unit (PPU).
TV = Average Sales x PPU
Second, calculate your cost-per-unit (CPU) by dividing your total cost for the campaign by the total number of units sold during that time period.
Analyze your website traffic data.
The importance of ROI in digital marketing can be measured by looking at your website traffic data. To do this, you’ll need to use a tool like Google Analytics or Crazy Egg. You’ll want to figure out how much time is spent on your site and then how much money was spent on advertising (e.g., Facebook ads). What’s left over is your ROI for that particular campaign. That number will help you determine what kinds of campaigns you should pursue and which ones are not worth it for your business.
For example, if an online banner ad campaign brings about a return on investment of $3 for every dollar spent, but a paid search engine optimization campaign brings back $8 for every dollar spent, then you know where to allocate resources in order to get the best possible return on investment from digital marketing campaigns!
In conclusion, there are many benefits to digital marketing that range from the ability to measure performance to increased revenue generation. To make sure you’re getting the most out of your efforts, make sure you’re following these three steps: Analyze your website traffic data; set benchmarks for performance metrics, and create a strategy with goals based on these benchmarks
Track your leads and sales.
As you know by now, the importance of ROI in digital marketing is paramount, and it’s one thing that many companies still struggle with. While there are no silver bullets, there are some key tactics that can help us get a better understanding of what is working and what isn’t. Tracking our leads and sales is an easy way for us to calculate our return on investment.
We can then know what channels are worth investing more time in. With this data, we have a better idea of how much money we’re making from our ad spend versus how much we’re spending to acquire leads or make sales through social media posts. Knowing this information will help us determine if it’s worth it for us to continue investing time and money into those channels or if we should shift our focus elsewhere instead.
Metrics that Help in Measuring Digital Marketing ROI
#1 Cost per lead (CPL)
If your website is generating leads, you should know how much you’re paying for each lead.
If the cost of each lead exceeds the revenue generated by closing leads, you have a negative return on investment.
Knowing your cost per lead allows you to see how effectively your marketing efforts are doing and provides you with the information you need to make future strategic and financial decisions.
#2 Lead close rate.
How do you keep track of your lead closings?
This happens much too often offline, which means that data isn’t being linked to analytics or the online data you’re collecting.
That’s OK, but you should keep track of your lead closure rate so you can compare it to the number of leads created.
This will help guarantee that your digital marketing activities are generating profitable leads.
This data can also be used as a check against fresh digital marketing activities.
If you suddenly receive a large number of new leads but discover that they close at a reduced rate, you may need to modify your targeting efforts.
Measuring closure rates also reveals how sales teams and reps convert leads into sales.
#3 Cost per acquisition (CPA).
This is easily calculated by dividing your marketing expenditures by the number of sales generated.
You now know how much it costs to make a sale, which will help you determine your ROI.
Many digital marketing experts use “cost per acquisition” (CPA) models, which pay for leads or sales based on a predetermined number or target.
This assists in pushing and driving aimed conversions or pre-determined results.
#4 Blog click-through rates.
Blogs are an excellent method to promote your brand and thought leadership while driving traffic to your website, but what do you do with that traffic?
While blogs are infamous for having high bounce and departure rates, it doesn’t mean you have to accept those totally meaningless stats.
Instead, utilize them to establish objectives for moving visitors from your blog to your main website.
A minor increase in blog click-throughs can result in meaningful new business at absolutely no extra marketing expense.
#5 Customer lifetime value (CLV).
You won’t be able to really appreciate the ROI of your marketing efforts unless you know how much the average consumer will spend throughout their lifetime. Assume that bringing on a new transaction or client costs you $500. However, they only spend $500.
When you consider the cost of everything else in addition to your marketing spending, that appears to be a net loss. However, what if you knew the consumer would spend $500 every six months for the following five years?
That client’s average lifetime value is $5,000. Now, $500 to get that consumer doesn’t sound so horrible, does it?
LTV = Average Revenue Per User (ARPU) x 1/Churn
That’s not to say you should lose money on every first-time client, but if the initial investment yields a sizable long-term return, you can more readily write off the first transaction as a marketing expenditure, knowing that profits will follow.
#6 Time Invested in Project/Campaign vs. Returns
Do you know how much time each member of your team puts into a given project or campaign? To get the most out of each employee’s expertise, make sure they are working on projects that are worth their time.
For example, if your firm has programmers ranging from novice to experienced, who would you like to work on the projects that earn the most revenue? Of course, the expert-level coders. Once you understand the worth of your projects, you can assign the right people to the right projects.
#7 Traffic to Lead Ratio
A rise in website traffic indicates that your digital marketing initiatives are effective. But do such outcomes have an impact on your company’s bottom line? The traffic-to-lead ratio is another method for determining the worth of your marketing activities. This KPI simply counts the number of visits that convert into leads.
For instance, suppose your website had 5,000 visitors this month. A lead was generated from 500 visits. You would have a 10:1 traffic-to-lead ratio or a 10% conversion rate for visitors to leads this month.
#8 Return on Ad Spend (ROAS)
Measuring the return on ad spend will help you determine how effective your advertising and sponsored initiatives are. Digital marketers may see that they spent X and received Y.
This is especially crucial for analyzing performance, comparing channel spending, and projecting. The majority of marketers follow the concept that your investment should provide a 3X return.
#9 Overall Revenue
As marketers, we are continually confronted with sales performance comparisons.
When sales operate well, sales are the focus, and marketing receives less attention.
When sales aren’t going well, marketing receives greater attention.
Avoiding these conflicts can be accomplished by measuring and attributing everything you do.
This might be a whole campaign, a marketing touch or assistance, or a piece of property. Ensure that your marketing and sales teams are working together to measure and report on bottom-line revenue. Establish ground rules and responsibility routes for leads, opportunities, and any marketing activity that affects or influences sales income.
Conclusion
“What is the ROI?” is the question that all CEOs and CMOs will be asking this year, regardless of sector or type of business.
As the popularity of digital marketing rises, so does the demand to show results.
Use the digital indicators mentioned in this post and let the statistics tell the narrative of your ROI.
