Business is simple but it can be a bit challenging. The bottom line is determined by revenue, minus expenses which equal profit, the same thing goes for digital marketing, and it also follows this same principle.

Digital marketing campaigns need to be treated as an investment. The best way to do this is by tieing your digital investment to overall performance. This is by calculating the return on investment.

One of the biggest questions business owners ask about their digital marketing campaign is what and how to measure their return on investment ROI they are getting from the money they spend.

What exactly is ROI

Your digital marketing’s ROI is a measurement of your online marketing campaign’s profits or losses,
Measuring your digital marketing ROI would help you determine the effectiveness of all your overall digital marketing strategies, . And to know your standpoint, Once you can know which areas are not performing well as you expected, you can work on analyzing these areas of your marketing campaigns and take actionable steps.

How to Measure Digital Marketing ROI

It is important to know that not all digital marketing campaign goal(s) have to convert to sales instantly. digital marketing ROI depends on your unique goal(s). It might not necessarily lead to conversion, Some digital marketing campaigns could mean to build awareness, Or to get customers into the buyer’s journey depending on your goals.
Determining your digital marketing ROI isn’t just about looking at how much money different campaigns bring in. But to know if your marketing campaigns actually met the set goal(s).
In this article I have put together a list of the most common digital marketing metrics you can use to measure your ROI:

1. Lead Close Rate

This measures the percentage of leads that are converted to sales. It’s very important to monitor your lead close rate. This is something you may already be doing, but if you haven’t, it better to start now. Keeping a close look at your lead close rate gives you a better idea of how effective your digital marketing campaigns really are, which in turn contributes to your return on investment. To calculate cost per lead, divide total ad or campaign spend by the total number of leads attributed to that campaign.

If you find that the cost of each lead is more than what you can produce when closing these leads, then you are not getting a positive return on investment.

2. Conversion Rate

Your conversion rate is the percentage of visitors that come to your website and complete a desired goal. This metrics is one of the most popular metrics used to measure return on investment in digital marketing.
Depending on the goal of your marketing campaigns, if it’s to convert, then conversion metrics will tell you how well you are accomplishing this set goal(s).
A high conversion rate means a successful marketing campaign.

3.Cost Per Acquisition(CPA)

Cost Per Acquisition, or “CPA,” is a marketing metric that helps to calculate the total cost requires to acquire one paying customer on a campaign. CPA is a vital measurement of digital marketing success. This metric tells you what you are paying to acquire an actual customer, not just a lead. you can calculate your CPA with the below formula

CPA = total campaign cost/conversion rate

4. Return on ad spend(ROAS)

It is a marketing metric that measures how much your business earns in revenue for every penny spent on advertising.
This metric tells you the revenue earned for your ad spend but doesn’t include other costs such as the cost of goods sold. ROAS is a useful metric for measuring your digital marketing ROI if you are able to tie revenue directly to digital marketing efforts.

Return-on-ad-spend is useful to metric, but you need to fully understand your profit margin to know what ROAS percentage you are profitable.

Revenue generated by the ad /cost of the ad =ROAS
acquisition.

5. Average Order Value

Average order value (AOV) tracks the average amount of money spent each time a customer places an order on a website or mobile app. AOV is another important metric that would help you better understand your digital marketing ROI. Since every business wants to see the number of orders increase over time, it’s then also valuable to pay attention to the average value of each order. You can simply Improve AOV by providing a better user experience or more effectively showcasing up-sell or cross-sell opportunities.
To calculate AOV, the total revenue/number of orders.

6.Customer Lifetime Value
Customer lifetime value is the metric that indicates the total revenue a business can reasonably expect from a single customer account. This metric is a vital measurement for understanding your digital marketing ROI. It’s (CLV) tells you what the average consumer will spend over their lifetime as a customer. It considers a customer’s revenue value and compares that number to the company’s predicted customer lifespan. You can use this metric to identify significant customer segments that are the most valuable to your business.

To calculate customer lifetime value you need to calculate average purchase value, and then multiply that number by the average purchase frequency rate to determine customer value. Then, once you calculate average customer lifespan, you can multiply that by customer value to determine customer lifetime value.

How to improve your business ROI

1.Establish ROI Goals

The first step in measuring and improving your digital marketing return on investment is identifying a clear goal()s that allow you to achieve objective results.

When establishing a business goal, it important to keep this acronym “SMART” in mind, a reminder to make sure the goal is
S= specific,
M= measurable,
A=achievable,
R=Relevant,
T= time-bound.
Avoid vague and loosely defined goals such as Instead, make sure that your goals follow the aforementioned rule.

2. Employ KPIs that are directly related to your goals.

Key performance indicators (KPIs), are the key metrics that you use to measure your progress toward a set goal.
Once you have clearly defined your campaign goals and objectives, you need to make sure that you’re using KPIs that align with these goal(s). The KPIs for email marketing will not be the same for SEO or social media marketing. Make sure you have your KPI in place.

I hope you find this article useful, remember to drop your comment(s).