With businesses going online, using traditional marketing strategies won’t be sufficient. To reach the target audience, the use of digital marketing strategies has become very crucial. It needs vision, planning, time, money, and efforts to make a successful campaign. Online markets are extremely competitive. Hence, it’s essential to keep track of the success rate of your digital marketing campaigns. The best way to calculate the success rate of digital marketing strategies is by calculating ROI or Return on Investment.
- What is the ROI?
ROI is the measurement of the results of digital marketing (in terms of money) against the expenditure done in creating and implementing those marketing strategies. This means, if the ROI is positive, then your campaign is successful, and you are generating profits out of it. If ROI is negative, then it’s time to rethink and bring changes in your marketing strategies.
ROI is a tool that helps companies to keep track of what is working for them and what is not. Once you have these answers, you can focus more on areas where you are lacking and bring improvements in them.
- How to Measure Your Marketing ROI:
Every marketing campaign does not aim at getting conversions. Some may aim at generating awareness among the target audience. Whereas others may aim at generating interest among the potential buyers, etc. Hence, measuring marketing ROI is quite tricky. The success of any marketing campaign depends on its end goal.
Here are some common metrics that can be used to calculate return on investment (ROI).
- Unique Monthly Visitors
As the name suggests, it calculates the number of people visiting the site every month. The result obtained by this metric is quite vague as we are not sure about the source (authenticated, social or paid) as well as the chances of the conversion of this traffic. To get more specific results, we need to segment our results based on their source and then check how valuable they are.
- Conversion Rate
This is one of the most popular and commonly used metrics to track ROI. It is generally used in cases, where the sole aim of the marketing campaign is to get conversions or buyers. Measuring conversion rates helps the company to find out what is working for them. It can also be used to find the source which is giving maximum conversions. Once identified, the company can focus resources on those channels to increase their ROI.
- Cost Per Lead
This metric is used to calculate the cost incurred to generate a lead. This is calculated by dividing total money spend on the campaign by the total number of leads generated by that campaign. Lesser the CPL more will be the ROI.
- Lead Close Rate
A lead is fruitful only when it gets closed. Lead close Rate helps companies to keep track of how often the leads get converted. This shows the effectiveness of the marketing campaign. It is calculated by comparing the number of closed leads with the total number of leads generated.
- Cost Per Acquisition/sale (CPA or CAC)
This metric helps to calculate the amount spend to earn an actual customer. CPA calculates the actual sales done against the total amount spent on the Ad campaign. It is calculated by dividing the total expenditure of an ad campaign by a total number of sales. Lower the CPA, higher will be ROI.
Revenue on Ad Spend or ROAS is used where the companies can relate their revenues directly to the efforts of digital marketing. It is calculated in percentage by dividing the revenue generated by the total cost of the campaign.
- Customer Lifetime Value (LTV)
LTV is considered as one of the most essential and crucial metrics to calculate ROI. This applies to almost all kinds of businesses. It helps in determining the average amount that a customer will spend on your products/ services throughout his/her lifetime. In simpler terms, LTV helps in calculating the overall worth of the customer. It helps companies in achieving their long-term goals.
- Average Order Value (AOV)
This metric calculates the average cost incurred once a buyer places the order. It is calculated by dividing revenue generated by a total number of orders. Businesses can increase their AOV by taking some simple steps like providing quality products or services and by creating opportunities for cross-selling.
Measuring ROI is just the beginning. Once you have calculated your ROI, you need to start working on measures to improve the ROI. Below we have discussed some tactics which may help you in improving your Return on investments.
- How to Improve Your Digital Marketing ROI:
- Identify What’s Working
The very first thing that needs to be taken care of is to find out what’s working for the company. This includes finding the channel which is getting most of the conversions. A visitor may or may not be a potential customer. You need to keep track of the total number of sales done by various channels. This can easily be done by installing conversion tracking on your website. Once installed, collect and analyze the data to find out what’s working.
- Use KPIs That Are Directly Related to Your Goals
There are many such metrics that are overvalued (e.g., shares and likes). However, these may not have any direct effect on the revenue. While calculating ROI, it is vital to consider KPIs which are related to your objectives and goals. This would help you in getting more accurate results.
- Test Different Targeting, Offers, Frequency, and Messaging
It is imperative to keep a regular track of the success rate of the ongoing campaign. Various factors like an increase in revenue, lead conversions, organic visitors, etc. play a significant role in determining the success of any campaign. Keeping a check on these factors would help you identify whether the campaign is working or not. If the answer is no, then you can experiment by using various b2b lead generation strategies like PPC, sending personalized emails, etc. to attract new customers and retain the existing customers.
- Identify and Seize Important Opportunities for Improvement
Once ROI is calculated, and all the tools are set, identifying and acting on the opportunities is very important. Analyze the data carefully as you might find some new business opportunities. Once identified, work on them as it would help you in increasing your ROI.