How to calculate ROI of paid Digital Marketing Services

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How to calculate ROI of paid Digital Marketing Services

When you invest in any form of marketing, you would like to know what the Return on investment (ROI) is. ROI is an important goal of digital marketing – this helps you calculate your money’s worth from your marketing campaigns. However, calculating ROI is not very simple. Basically, 2 things account for positive ROI:

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  • Bringing more visitors to your store (or online store)
  • Convert the visitors who show up at your store or online store

Unfortunately, many attempts to measure the ROI of digital media focus on these end results, totally ignoring the variety of factors that generate positive outcomes — a very dangerous practice.

Understand the campaign goals

The most important step is to define and understand the goals of the marketing campaign. Goals go deeper than just outcome performance measures. Your digital marketing goals should be SMART (Specific, Measurable, Achievable, Relevant and Time Related) Different goals could be Brand Engagement, Lead origination, Improving Conversion rate etc. There are a complex set of factors and interrelations among them which impact in a positive ROI based on your marketing goals. Once you understand them thoroughly, you can identify the key performance indicators affecting your campaign’s ROI.

Measure what matters

Often you’ll find digital marketers measuring the easy things — likes, clicks. These things matter a lot, but they’re not the most important (or only) important aspects of a successful digital marketing campaign.

These KPIs provide valuable metrics on how your brand is working:

  • Number of unique site visitors: How many new prospects are visiting your website
  • Number of return visitors: How often do your prospects come back to your site? Increase of return visits means you are providing useful and valuable information for the consumers.
  • Conversion rate:How many of your site visitors become customers? High number of visits doesn’t guarantee conversions. You may be drawing a big crowd of the wrong audience for all you know.
  • Buying your product:No sales, no revenue! Be sure to establish a strong demand for your product before you invest heavily. Conduct pre-launch surveys to assess interest and thorough market research to find similar products.
  • Search engine ranking: How close are you to the top of the search engine searches.
  • Social Networking Presence: What is your presence on different social media like Facebook and LinkedIn. Are you present on all the social media your potential customers are on? This changes from industry to industry.
  • Increase in Followers: The more people follow your social media channels, the higher reach, and also a better and efficient marketing campaign
  • Social Interactions This measures the effectiveness of your social media campaigns at fostering positive engagement. Key interactions can play a pivotal role in a post or story going viral
  • Lead Origination: What are the channels that bring you leads? Is it email marketing? Or social media?
  • Cost per sales lead.How much does it cost you to find each prospect?
  • Revenue per Sale: How much average revenue does one sale generate?

Revenue ÷ Number of Transactions = Average Revenue per Sale

  • Lifetime Value of a Customer The lifetime value of a customer is determined by knowing how much each customer typically spends with your company over their lifetime 

Lifetime Transactions x Lifetime Revenue – Lifetime Expenses = Lifetime Value of a Customer

Analyze the metrics

Having a dashboard full of statistics doesn’t mean anything if you are not able to interpret them. Since numbers don’t speak for themselves, you need skilled analysts to dig deep and uncover the insights of the metrics.

Don’t stop with descriptive analysis:

Descriptive analysis helps you a lot, there’s no denying in that, but don’t stop there. Move to predictive analysis. Predictive analytics drives competitive advantage by identifying patterns in historic and current data by drawing reliable conclusions about current conditions and future events. Based on the analytics you can rightly calculate the amount you spent in digital marketing vs. the revenue you generate from the campaign. The revenue is associated with all the key factors mentioned above and more. Positive ROI indicates a successful digital marketing campaign.

Before investing in a digital marketing plan, understand your objectives, define the campaign goals and analyze all the factors associated. Often you need an expert’s help to have a better insight into the analysis.

Need help? Talk to us and let’s plan your digital marketing strategy

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