The ultimate aim of every business is to make a profit. Every dollar spent on marketing and advertising is expected to yield certain positive results. These results can be increased awareness for a brand or product, increased sales, increased users' engagement, and so on.
Usually, the major motive for a digital marketing campaign determines the key performance indicators (KPIs) that managers can use to judge the effectiveness. To increase marketing ROI, you need to measure the current performance of an existing campaign accurately. Once we can gauge the strengths and weaknesses of our current efforts, we can then make necessary adjustments to get more from our campaigns.
How to measure digital marketing ROI?
Measuring the success of your digital marketing campaign depends largely on whether it is meeting its objectives. Not every campaign is aimed at closing a sale. Some campaigns may ultimately seek to increase user engagement. Due to differences in goals, there is a need for managers to identify and establish KPIs that can measure the progress of each campaign. Here are some of the key metrics to consider:
This is one of the most obvious metric marketers use to gauge ROI over a specific period. If the main objective of your advertisement is to increase sales, then you need to focus on the conversion rate and of course, volume. To get a clearer insight into how your conversion rate stands, you need to look at some key areas:
Conversion rate by channel
You want to know, from all your sources of traffic, which channel is converting more than the others. Once you find the best performing channels, you can play around with your budget allocation (invest where conversion rates are high) to get greater returns on investment.
CR by Channel = Number of Conversions per Channel / Number of Opportunities per Channel
Conversion rate by device
A particular device might outperform others in traffic generation but have a very low conversion rate. This is undoubtedly a waste of traffic if conversion is your motive. It is better to reduce efforts and investments in these channels and direct them to others that have better conversion rates.
For example, when marketing a mobile gaming app, we expect more traffic to come from mobile devices. But if traffic from PCs and laptops produces a higher conversion rate, then it might be appropriate to cater more of your marketing efforts to desktop devices.
CR by Device = Number of Conversions per Device / Number of Opportunities per Device
Cost Per Lead
This metric is essential if the main objective of your digital campaign is to generate leads for your sales team. You can calculate this using the formula below:
CPL= Total cost for campaign / number of unique leads generated
*Note that this assumes your goal is lead generation. To determine your actual ROI, you need to know how much a lead is worth to you. That takes into account your lead close rate and average customer lifetime value (CLV).
Lead Close Rate
The lead close rate helps to determine if CPL is justified. With a set lead close rate, you can gauge the effectiveness of subsequent campaigns. You can use this metric amongst other things to also evaluate your sales team to see how effective they are working to achieve your growth goals.
Lead Close Rate = Number of Closed Leads / Number of Leads Generated
Cost Per Acquisition
This metric tells how much you will pay to get a new customer for your business. It is calculated by dividing your total cost for the campaign by the number of sales generated. You can use cost per acquisition to determine if what you pay for getting an extra customer is good enough to keep you in business or if you need to become more efficient at growing.
CPA = Overall cost of the campaign / Number of customers generated from the campaign
Many other metrics that could be used to determine the effectiveness of your digital marketing campaigns can be found here.
How To Improve Digital Marketing ROI?
To improve your digital marketing ROI, the first thing is to place the proper value on metrics. It is quite alarming to note that many marketers do not take digital marketing metrics as serious as they ought to. Other ways of improving marketing ROI include:
Setting clear and achievable digital marketing goals
You need to set SMART (Specific, Measurable, Achievable, Realistic, Time-bound) goals that you can optimize your activities around. Once you set your goals right, you automatically acquire a strategy to work with and increase your chances of success.
Be flexible enough to experiment with new strategies so you can diversify your marketing strategies. Expanding your digital marketing channels and approaches can help you uncover new, potentially more effective avenues for easy wins.
You may not get instant results when implementing a new digital marketing strategy. You have to be patient and pay close attention to your KPIs so you can gain valuable insights, which will eventually culminate in increased better decision making in the future.
Manage your time wisely
Keeping track of your digital marketing can take up a lot of unnecessary time if you fail to automate some processes and schedule your tasks. Use a timesheet app to keep your team on track with their time investments. You’d be surprised how much more productive your team could be!
Over to You
With the combination of the right strategies and tools, any online entrepreneur can increase their digital marketing ROI. This, however, requires patience and commitment to doing what it takes to achieve success.
Have you used a unique digital marketing strategy that has helped increase your digital marketing ROI? Feel free to share it with us in the comment section. We'd love to hear from you.