How to calculate ROI with your Digital Marketing

ROI, or return on investment, is one of the most important statistics your company is going to look at during their period of digital marketing. Expressed as a percentage, it is used to determine a company’s profitability and a higher ROI means a more profitable business and a more successful campaign.

Why Should You Calculate Your ROI?

You might think that there is no reason to calculate ROI when it comes to a digital marketing campaign but it is actually extremely important; if you don’t measure it, all you are doing is firing off marketing campaigns with no idea whether or not they are effective.

A good campaign with a high ROI percentage is one which brings in more money than what you spent on it. Not measuring this means that you could be wasting money on an idea that does not actually work.

The Starting Point

One of the first things you should think about when determining how to calculate the ROI is the purpose of the ad campaign itself. Is it for conversion? Not all campaigns are. Some are used to build awareness for the brand or a philosophy they might have. Are you using a standard advertising strategy or are you using something a little more like native advertising?

Let’s take a look at some of the things you can use to determine your ROI for your campaign.

Conversion Rate

While it is true that a high conversion rate might not be the goal of many campaigns, it is still an extremely important indicator as to how well the campaign is running.

One of the first things you should look at is your conversion rates by channel. This piece of information tells you where you are getting the most traffic from. Is it from your organic searches or your social media? Perhaps it is from email or using a dynamic ad? Knowing which channel is the most popular will help you to determine where you can focus your attentions and where you can step back a little.

You should also take a look at conversion rates by device. Mobile devices bring in a lot of traffic but converting them is a harder story. If you are certain that you want to aim for a mobile audience, then you need to make sure that your campaign reflects this.

Cost Per Lead

If you are on the hunt for new leads for transactions, you need to work out your CPL or cost per lead. To do so, you need to divide the amount of money spent on ads by the number of times a lead was gathered because of them. This number will give you a great indicator into how your ROI is doing through one simple factor; if you are spending more on each lead than what you get when you close them, then you are not getting a good return on your investment.

Cost Per Acquisition

Another thing you need to take note of is your CPA, or your cost per acquisition. This figure tells you how much it costs to get you a new customer. It is simply calculated by dividing the amount you have spent on ads by the number of sales you have generated. This is also one of the simplest ways to work out your ROI. If you are spending more money trying to attract a customer to your goods than they are spending on your services, you are obviously not making a good return on your ad investment.

These are only three of the ways you can work out your ROI, but they are three of the most important. If you need help understanding any aspect of your ROI or your acquisition rates, do not hesitate to contact the Media Octopus today!

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About the Author: Emma Fletcher