Analytics

How to Measure Your Digital Marketing ROI

The key performance metrics we go over over all have an important place in evaluating a digital marketing strategy.

There are few better ways to attract new customers in today’s online world than through digital marketing. An excellent digital marketing strategy has more or less become a necessity in many sectors. It has increased the reach of many businesses to degrees unheard of before the digital revolution. 

However, this raises a basic question: how do you know whether you have a great digital marketing campaign? Not only might your business be wasting money on an ineffective strategy, but you could also be missing out on opportunities to grow your business. 

For that reason, you must monitor the performance of your digital marketing to ensure you’re getting the most out of the potential that the internet represents. 

The Basic Equation: Return on Investment (ROI) 

There’s nothing specific to the ROI that ties it to the practice of digital marketing. Rather, ROI is one of the foundational ideas of modern business, representing the profits that you make from an investment. And advertising is an investment like anything else, so you want to make sure that you’re making money back from it. 

To calculate your return on investment for digital marketing, use the following equation:

ROI = (Net Profit / Cost) * 100

This equation yields a percentage value that tells you how much money you make from a specific investment. 

For example, if you run a digital campaign that has a cost of $100 and gain $125 as a result, the equation will look like so: 

ROI = (125 / 100 ) * 100 = 125%

This ROI tells you that each dollar you’re investing in the ad campaign brings in $1.25. This is not a bad ROI, representing a profit rather than a loss, but you always want to maximize your ROI. 

The Limitations of Basic ROI 

The main problem with using ROI to evaluate your digital marketing strategy is that it can be challenging to know precisely what profits result from online marketing. You may end up attributing too much of your success to digital marketing or underestimating the degree to which it leads to sales. 

For that reason, digital marketing experts have invented many other metrics that help you more fully evaluate the impact of digital marketing. 

Other Measures: Key Performance Indicators

Here are some of the most useful measures of the performance of digital marketing. Each of them has a place in evaluating the success of a digital marketing strategy or campaign.

Unique Monthly Visitors 

Charting the changes in how many people are visiting your website is an excellent way to isolate the impact of digital marketing. If you see a sustained spike in traffic after the introduction of a new digital marketing campaign, that’s a good sign that the campaign is also leading to increased profits. 

Cost Per Lead

When it comes to spending money on Google ads, there’s a built-in feature that helps you track the cost of leads that come to your site through the ads. This metric is helpful for figuring out the cost side of the ROI equation. 

Cost Per Acquisition

There are few better ways to attract new customers in today’s online world than through digital marketing. An excellent digital marketing strategy has more or less become a necessity in many sectors. It has increased the reach of many businesses to degrees unheard of before the digital revolution. 

Return of Ad Spend 

The return of ad spend is the same as an ROI but it looks at an individual digital ad. This is a great metric for figuring out what ads work and what ads aren’t pulling their weight. You can use this measure to fine-tune your ad strategy. 

Putting It All Together

The key performance metrics we’ve gone over all have an important place in evaluating a digital marketing strategy. They can both help your estimation of the overall ROI of your advertising spend and provide supplemental information about it. 

Keeping track of your ROI is essential, but not as important as continually working to increase it. Metrics like the return on ad spend can help in this task by creating opportunities to zone in on specific aspects of your digital marketing strategy. 

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