In the world of digital marketing, Return On Investment (ROI) is the measure of profit or loss obtained after the expenditure of a specified budget on marketing campaigns.
In other words, it is the measure of success or failure in terms of percentage with respect to the amount spent. If you have a positive return on investment (ROI), it signifies that campaigns are gaining more money than what you are spending on the campaigns.
For any business, measuring Digital marketing ROI is important to progressing further or arriving at alternative working solutions.
Once you can able to identify the best-performing areas and those who don’t, you can do a deep analysis of the campaign aspects, and take required action towards improving the ROI.
Things to consider before calculating Return on Investment (ROI)
1. Business Goals
Business goals are very important before you think about business returns upon digital marketing. Your unique marketing objectives is what makes you stand out of the crowd when you market on digital media while using the best strategies.
2. Key Performance Indicators (KPI)
Every business is different and their special values make them leave a mark in the market and the location. So, if your business is unique, make sure to deploy in the targeted areas to automatically increase the positive KPIs while spending minimal amounts on ads.
3. Clean Data Collection
To achieve the best KPIs for your business, the complete data collection system needs to be maintained clean without any inconsistencies to avoid any miscalculations.
Inaccurate KPIs will not be useful in measuring ROI or enabling effective digital marketing methodologies for increased productivity.
4. Insight analysis
Key Performance Indicators (KPI) afford insights about the amount of website traffic, cost-per-lead (CPL), SERP rankings, and engagements on Facebook or Instagram which when taken into analysis makes way to measure the digital marketing ROI. From attracting customers to generating conversions, insight analysis is the base.
Key Performance indicators of Digital Marketing ROI
While measuring ROI, here are the key performance metrics you got to pay heed to
Visitors per month: This indicates the number of users who visited your website in one month. This data can be further classified by the sources of traffic – organic, paid, or social.
Cost Per Lead: Google AdWords automatically calculate this metric which shows the cost spent for acquiring a lead in Google Adwords.
Cost Per Acquisition (CPA): The amount spent to acquire customers per campaign is all about this metric. It is usually calculated by dividing your total marketing spent amount with the number of customers acquired.
Return on Ad Spend (ROAS): The total profit made from an advertisement online and the total amount cost spent creating is indicated by this metric. The formula is (revenue/total ad spend)*100.
Average Order Value (AOV): This is the most important metric when it comes to E-commerce, B2B companies and service-based companies. It allows to find the purchase value of every customer and gives the profit upon calculating the average.
Customer Lifetime Value (LTV): The credibility of a company is determined by the valuable customers it has. Therefore, a customer lifetime value is precious for any business to distinguish and find the potential leads.
Lead-to-Close Ratio (LCR): This ratio is obtained by dividing the number leads with the number of leads closed for a particular period. The quality of the leads acquired and the leads successfully closed by the sales team are effectively measured in this way. Thereby you can find the projected digital marketing ROI with lead to close ratio
Branded Search Lift: This KPI allows you to make a note of those users who looked over for your particular brand on the internet. As your business begins to rise, this metric will increase simultaneously. This also indicates the brand awareness among the online audience
Average Position: This metric deals with the average search engine results in the positioning of your brand for the targeted set of keywords.
The higher your ranking, the more will be your website traffic and thereby more clicks, revenue & ROI. With the help of Google Analytics, you can differentiate the sources too.
Non-Brand CTR: Non-brand click-through-rate will offer insights into the performance of SEO strategies.
These above-mentioned metrics are important for any business to track and get hold of the Return on Investment (ROI) accurately. This, in turn, will measure the overall digital marketing ROI of your digital marketing campaigns.
Landing Page Performance Metrics Matter
In this digital era, website landing pages are crucial to bring prospective leads as people are more engaging online. Here are some important metrics to consider and track regularly for ROI measurement.
Bounce Rate
It refers to the number of site visitors who left after visiting just one page of the site. The more the time spent on a site by the user, the less will be the bounce rate.
The lower the bounce rate, the more helpful it is for your online success. Bounce rate is available on Google analytics to be viewed by the site manager.
Potential Conversions
Nowadays, in most cases, landing pages are created to direct the visitors down to the sales funnel and thereby convert them into sales and conversions.
It can be a product or a service page or a page for signing up or any other desired action for which the user visits.
Final Thoughts
Trust and authority created due to the best online visibility and engagement will lead to augmented sales and conversions. As a result, greater revenue and better ROI can be attained through digital marketing efforts.
Calculating the ROI in digital marketing is reliant on factors such as company size, business goals, audience, and industry type. Most probably, the ROI alone cannot measure the success of your business or marketing efforts.
But ROI is very important to find the awareness of your business among the audience online. Make sure to measure ROI with the help of KPI and take your business to the next level.
