14 Ways to Calculate Digital Marketing ROI

By on Jun 17, 2022

We all know that clients hire marketing agencies to help build their businesses. The idea is to make money not spend it on marketing that isn’t showing results. You need to stay on top of your marketing ROI to show your clients your value, but also to make needed tweaks in your campaigns.

1. The Basic Marketing ROI Calculation

Before we get into types of digital marketing ROI you will most likely need, let’s look at the basics. The basic marketing ROI calculation is

Marketing ROI = Net Profit ÷ Total Cost x 100

But the practical reality is it can get a lot more complex than that.  Profits are not always immediate, and it’s not always a straight line to determine if profits are directly related to the costs of a specific campaign or action. For example, it takes a bit of analysis to determine the ROI of content marketing. That doesn’t mean you should not monitor all your marketing efforts and track as closely as you can.

Following are some key ways you should be tracking marketing ROI.

2. Traffic to Lead Ratio

It’s great when your marketing efforts lead to an increase in your client’s website traffic, and certainly you want to track unique visitors to your client’s site. But is your client’s increased traffic turning into more leads? Track the percentage of visitors who turn into leads, because traffic is just the beginning.

3. Cost per Lead

One of the first things your clients are going to want to know is the cost per lead for your marketing campaigns. Look at how much it is costing you to get leads in every channel such as your website and trade shows. Are leads from some channels more valuable than others, more likely to result in sales or more likely to result in bigger sales?

In some cases, such as digital advertising, you can calculate the cost per lead directly, often tracked as cost per conversion.

4. Lead Close Rate

Leads don’t matter much if they are not quality leads that you or your client can close.

Lead close rate = Number of leads ÷ Leads that are closed

Pay attention to what leads are closing the best and shift your lead generation accordingly. Are your best-closing leads from a particular channel? Are they made up of a particular demographic?

5. Average Order Value

Average Order Value varies wildly according to industry. Some businesses don’t sell a lot of volume, but what they do sell is extremely high priced. Think private planes. Other businesses sell much lower priced items, so they need to sell a at a large volume.

No matter what the price point of the products you are marketing, look for ways to increase the size of each order. What add-ons can you offer that will be hard to turn down? What other products would work well with the product your client’s customer has chosen?

Another thing to consider is pricing. Would the traffic bear a small price increase? Is there some extra perk or service you could add to justify the price increase? The additional small add-on often adds up to quite a bit if another people are buying it.

6. Cost per Acquisition

The down and dirty way of figuring out your cost per acquisition is simply by dividing marketing costs by number of sales. This is pretty precise for paid advertising campaigns, but not so much for some other types of marketing.

However, Cost per Acquisition is a critical measurement, because it tells you want you need to spend to get a sale.

7. Channel Conversion Rates

If you are optimizing your marketing, you are using several channels to get out each client’s message. One marketing effort builds on the others. That’s the power of integrated marketing.

But that doesn’t mean each channel is going to have the same marketing ROI. You need to keep close track of what marketing channels are performing the best for your client. You may want to put more budget or creative juice into channels that are the most profitable in order to boost ROI.

8. Conversion Rates by Device

In the last several years, it’s become increasingly important to pay attention to conversion rates by device. If you find most of your conversions are coming in through mobile devices for example, you may want to focus your efforts on your mobile presence – or you may want to amp up your presence on desktop computers and laptops.

The point is that you need to know where you are regarding conversions by device before you can address how to optimize your marketing ROI on each device. Of course, this particularly important for ecommerce, where people make their purchases on their devices.

9. Landing Page Analytics

Pay attention not just to your client’s site as a whole but to specific landing pages.

  • What is the conversion rate?
  • What is the bounce rate?
  • How many visitors leave from the page vs. other pages?

With this information in hand, you’ll know what landing pages need work.

10. Blog Click-Through Rates

Don’t forget to check the Click-Through Rate of your client’s blog. A lot of businesses have blogs but don’t really guide people from the blog to elsewhere on their site such as product pages or other pages that are likely to lead to a sale.

But you need to keep them on the blog long enough to guide them. So, make your client’s blog readable. Blogs should be set up so they can be easily skimmed. This means short paragraphs, a lot of white space, a lot of subheadings and bullets.

11. Average Position in Search Engines

Calculating the ROI of your average position in search engines is valuable but not easy. To give you an idea how it’s measured, if you are at the top of a search engine’s first page for all your keywords, your average position is 1. You can get your average position through Google Analytics. To find out more about determining marketing ROI for average position in search engines, see this article.

12. Click Through Rate

Click through rate that measures everything except your brand will tell you how your SEO is doing. You can track CTR on Google Search Console. For paid searches, you can track monitor on tools Google provides for tracking Google Ads.

13. ROAS

Return on ad spend is a helpful metric, but it is not exactly ROI because it does not include cost of goods sold. You can get an accurate report from your ad platform such as Google.

14. Customer Lifetime Value

Marketing is a long-term game, so to determine your marketing ROI, you must know the lifetime value of a customer for your client’s business. Sure, it’s great to make more on a customer’s first purchase than what it cost your client to land them.

But that’s not the be all, end all. You need to consider what you can expect them to spend with your client over their lifetime. If it’s a lot more than it cost to get the customer, then it’s ok if sometimes the first purchase doesn’t yet pay off.

Here’s the formula:

Customer Lifetime Value = Average Total Order Amount X Average Number of Purchases Per Year X Retention Rate Per year

Conclusion

Marketing today is built on data and calculations. You need be able to measure where your client’s marketing has been, where they are now, and where they are going. You need to understand how to calculate digital marketing ROI and expertly use tools to measure accurately.

If you are not an expert at analyzing ROI, testing ways to improve it and adjusting campaigns for ever-increasing success, don’t worry, you don’t have to be.

Contact Umbrella for a free consultation about white label strategic marketing services and white label SEO services.

 

 

 

 

 

 

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