One of the most important parts of running a digital marketing strategy is knowing how to evaluate performance. You need a way to measure the impact of your various campaigns to determine whether they are actually helping your business. A way to tell if marketing efforts are generating a good return. One of the most common ways to do this is by calculating your marketing return on investment (ROI).
What Is Marketing ROI?
Marketing ROI is a way to see if marketing initiatives are working in terms of driving key performance indicators (KPIs). For example, brand awareness, leads, sales, etc — whatever specific metrics are important for your business. Basically, it measures how much return you are getting for every dollar you spend on your marketing campaigns.
As you can imagine, marketing ROI is a valuable tool for things like budget allocation. The answer will help you determine if your marketing strategy is working and which campaigns are most effective. Armed with this knowledge, you can make data-driven decisions to further optimize and scale your marketing activities.
How to Measure Marketing ROI?
Measuring digital marketing ROI can be a bit tricky. It’s not just about looking at how much revenue a campaign brings in and then comparing it to the cost. That’s because many online marketing campaigns are designed around more than just generating sales in the short run. Ultimately, how you measure your marketing ROI will depend on your business goals.
However, here are some of the most common metrics that are used for digital marketing ROI analysis:
Conversion Rate (CR)
Conversion rate is one of the most popular metrics used to track marketing return on investment over time. If your campaign is meant to convert visitors into leads or customers, this metric will tell you how well you are accomplishing this goal. To calculate your conversion rate, divide the number of people who converted (i.e. they did what you wanted them to do) by the number of people who visited your landing page/website, then multiply the result by 100. It’s important to check the conversion rate for each of your marketing channels so that you can compare performance.
Cost Per Lead (CPL)
If you are running a digital marketing campaign to collect new leads then you need to measure how much you are spending on each new lead. To determine cost per lead, divide the total campaign spend by the total number of leads generated through that campaign. If the cost of each lead is more than what you get after closing said leads, then you are not getting a positive return on investment and need to make some adjustments.
Cost Per Acquisition (CPA)
Knowing how much it costs you to acquire a new customer helps you better understand your marketing return on investment. You can calculate this by dividing your total campaign spend by the total number of sales generated through the campaign. If you are spending more to acquire a customer than what they will bring into your business, you have a negative ROI. This suggests that you need to revisit your marketing campaigns and find ways to lower your CPA.
Customer Lifetime Value (CLV)
This metric measures what your average customer will spend throughout their relationship with your business. The simplest formula for measuring CLV is to multiply the customer revenue per year by the retention time (in years) of the customer. Then you subtract the total costs of acquiring and serving the customer. Though initial customer acquisition costs are important, understanding the long-term profit that you can potentially gain from a customer gives you a new perspective on your marketing return on investment.
What Are the Challenges of Measuring Marketing ROI?
Many small business owners struggle with measuring their marketing ROI due to the following reasons:
- Lack of time: ROI analysis seems overwhelming when you consider all the different moving pieces that make up a digital marketing strategy. Having to log in and download reports for each and every channel or platform you use takes up quite a bit of time.
- Lack of data conformity: Google Ads, Facebook, Nextdoor, your email marketing service, etc. — all of these platforms use different reporting methodologies. The lack of reporting consistency is a real problem. To accurately compare the performance of each channel, you have to figure out how their definitions and calculations differ. For example, do they have different ways of defining what counts as a “conversion”? Do they all calculate something like “engagement rate” in the same way?
- Lack of cross-channel visibility: The data you get from Facebook, Google Ads, etc, only reflects what’s happening with that particular channel, not your entire strategy. Not only do you have to download a dozen reports and make sure the data is consistent, but you also have to piece everything together to get a big picture view of your overall marketing ROI.
So, what are your options?
The old-school way of tracking marketing ROI is to use an Excel spreadsheet and manually measure and analyze all your campaign performance data. However, this is a tedious and time-consuming process that requires constant attention and logging into a dozen tools. You use up all your time measuring things that you don’t have any time or brainpower left for analyzing and putting new insights into practice to see improvements.
A better alternative is to use an all-in-one platform that does all of this automatically for you. Instead of a confusing spreadsheet, you have an intuitive, easy-to-use dashboard with your most important marketing metrics front and center: number of new inquiries, cost-per-lead, new reviews, money spent, local rankings, etc. It frees up your time and mind to focus on improving your business and marketing while giving you the tools you need to do so.
Four Key Principles to Improving Your ROI
1. Be able to measure your core metrics
A vital part of improving your marketing ROI is to regularly analyze your core performance metrics — namely sales, leads, and traffic. You need to drill down into these metrics and understand how they impact your business revenue. Armed with that knowledge, you can then adjust your marketing campaigns based on the results.
2. Experiment with different marketing channels
Experiment with different marketing channels to determine which ones generate the highest ROI for your business. Some key channels to consider are email marketing, social media, video marketing, and paid advertising. Monitor performance to see which channels and networks your customers use and respond to best.
3. Focus on your marketing spend
Another important practice for improving your ROI is keeping tabs on how much you are spending in each stage of your marketing campaign. By comparing the conversion rate, leads, and profits generated by each of your channels, you can uncover areas of high spend/low return.
4. Be able to access your data from any device, at any time
Having a way to quickly and easily access your marketing data is critical to improving your ROI. Finding time in your busy day to check your core metrics, test different campaigns, etc, requires having a system in place that you can manage while on the go. Otherwise, these ROI optimization tasks will get pushed to the back-burner until the rare occasion when you have some uninterrupted time at the office.
Making ROI Measurement Easy
Surefire Local provides the industry’s most powerful marketing platform, custom-built for local marketers. Our mission is simple: make online marketing easy so small businesses can grow profitably. We put you in control of your digital transformation, helping you improve productivity and gain more transparency of marketing spend and return on investment
With the Surefire all-in-one marketing platform, you can view all of your performance data, from all of your marketing channels, all in one place. The platform’s built-in advanced targeting and A.I.-powered analysis help you attribute all your marketing activities to revenue generated — making it easy to measure marketing ROI.
You know exactly where new leads are coming from, the marketing activities that drove them to convert, and how much everything cost you. You can continuously discover new insights and take action to further optimize specific campaign performance and your marketing strategy as a whole
Furthermore, your dashboard can be accessed at any time, from anywhere. Instead of having to wait until you have a day in the office to review your marketing ROI, you can look at the data and manage your campaigns even while on the go. This degree of accessibility and transparency enables you to quickly pivot and capitalize on emerging marketing trends — all before your competition catches on.
Contact us today to book your free demo of the Surefire Marketing Platform. We look forward to hearing from you!