How Is ROI Measured In Digital Marketing

October 19, 2022
How Is ROI Measured In Digital Marketing

One of the greatest difficulties the majority of marketers face today is proving the Return on Investment (ROI) of digital marketing. According to a recent research report, about 47% of marketers find it challenging to attribute leads to revenue. In comparison, roughly 42% are unaware of the correct metrics to measure performance.

However, if you are unaware of how to calculate ROI in digital marketing, you won’t be able to determine the ROI of your efforts. As a result, you won’t be able to plan your future strategy. But don’t worry, as we’ve compiled a list of the most essential metrics that you must keep track of to measure the ROI of digital marketing. 

How to Measure Digital Marketing ROI

It takes more than just looking at much revenue various campaigns bring in and then comparing it against the expenses to know how is ROI measured in digital marketing. As you might be well aware, not all digital marketing campaigns have an end goal of conversion.

Few campaigns intend to generate customer awareness, while others aim to get customers into the marketing funnel. At the end of the day, how to measure ROI in digital marketing relies on your distinct set of goals.

The amount of information available on Google Analytics can be overwhelming, so here are the most popular digital marketing metrics to help you measure ROI. 

1. Conversion Rate (CR)

Identifying traffic channels or sources is an excellent way of determining what works for a certain business. Still, traffic alone is not considered the most reliable metric. Ultimately, determining what percentage of the traffic generated converts into paying customers is of the most value.

One channel may be producing significantly higher traffic than the other. However, it might not be driving conversions. Contrariwise, some other channels may be drawing in minimal traffic. Still, most of that traffic might turn into conversions, which is far more valuable. This is why conversion rate is the number one preferred metric for the ROI in digital marketing. 

2. Cost per Lead (CPL)

Cost per Lead is a vital metric for measuring ROI in digital marketing. Simply put, it refers to your investment to create a lead. For advertisement campaigns, you can track the CPL directly through social media advertising channels or Google AdWords (the metric for this is the cost per conversion).

CPL can also be calculated by dividing the total ad spend (sum of money used on a set of ads) by the total attributed leads (number of times a lead was gathered and attributed to an ad). CPL is typically connected with paid campaigns because you do not really pay to generate organic traffic.

Still, you can apply it to other digital marketing plans since they contribute to lead generation by indirect means. It is calculated by dividing the total campaign’s investment by the leads produced by it.  

3. Cost per Acquisition (CPA)

Cost Per Acquisition is much like CPL. The only difference is that CPA focuses on actual conversions instead of just leads. This metric is primarily the cost to obtain a customer, which makes it relatively easy to calculate for paid ad campaigns than for Search Engine Optimization (SEO) initiatives. 

In general, you can calculate CPA by dividing your total digital marketing spend by the total number of customers obtained in a given period. 

4. Return on Ad Spend (ROAS)

ROAS is a metric that specifies the ROI of your ad campaigns. Unlike other digital marketing techniques where calculating ROI can be challenging, you can quickly determine your ROI with paid campaigns.

ROAS directly ties revenues to the expenses of running a paid ad campaign. It’s calculated by dividing the total revenue attributed (through your ad campaign) by the total ad spend. If you run advertisement campaigns, ROAS isn’t something you should overlook. 

5. Customer Lifetime Value (CLV)

Customer Lifetime Value is a valuable metric that’s worth calculating. It is beneficial for online businesses as it estimates how profitable customer(s) might be in the long run. CLV tells you whether the money you spend obtaining a customer is worthwhile.

For instance, if you gain a customer for $X and they only for a single purchase worth $X or less, then that CLV is $X as they are unlikely to make repeat purchases. Hence, the money you spent on gaining that particular customer wasn’t worth it. 

6. Landing Page Performance Metrics

Finally, numerous metrics identify the performance of your landing pages. Since landing pages play a fundamental role in driving leads down the marketing funnels, the following metrics are worth tracking. 

●  Bounce Rate

Bounce rate refers to the share of site visitors who leave right after visiting one page and do not move to other pages. A lower bounce rate is better for a business. 

●  Time Spent on Page

This particular metric enables digital marketers to evaluate the effectiveness of their landing page content and design to engage their audience. The more time viewers spend on these landing pages, the higher the likelihood of them not exiting and moving on to another page.

Hence, your landing pages must be attractive enough to hold your viewers’ attention long enough to take them to a different page.

 

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