ROI is one of the important metrics in any type of investments we make. As businesses are increasing their digital advertising investments ROI measurement and analysis should be kept on primary focus as it will help in growing the revenues and profits. To start with first we need to understand about ROI.
What Is ROI?
The simple definition of ROI:
ROI is what you expect to get back on what you are spending as an investment.
The standard definition of ROI:
Return on Investment (ROI) is a performance measure, used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments. ROI measures the amount of return on investment, relative to the investment’s cost
What is ROI Digital Marketing?
ROI Digital Marketing is a figure showing the profit you’ve made from your digital advertisement or campaigns compared to the amount of money you’ve spent on them.
Why should we measure Digital Marketing ROI:
In any business, collecting metrics that indicate the return on investment for a particular digital campaign or strategy is essential to the success of your performance. Doing so informs you whether what your company is getting in intended results, and can allow for a quick strategy change if the numbers start progressing in a negative way.
To run a successful digital marketing campaigns measuring ROI is a crucial part. The common dilemma of any digital marketer is “Half the money I spent on marketing is wasted, the problem is I don’t know which half”.They are not sure where exactly they are investing in the marketing.
To overcome from this dilemma, measuring ROI is a crucial part for any business for that you need hard data & insights so you can make better decisions on which areas to spend more money on and which to cut off. Now the question is how to calculate ROI from these data and insights.
How to calculate ROI:
There are multiple methods of calculating ROI, very popular methods are:
- Historical Method:
Historic method for calculating marketing ROI looks like this,
ROI = (revenue / spend) – 1.
- CLTV Method:
Customer lifetime value method for calculating marketing ROI looks like this
ROI = (customer lifetime value – marketing investment )/ marketing investment.To calculate ROI of a digital marketing, Customer lifetime value is a critical metric and it plays an important role in marketing.
Did you know that these two metrics: Customer Acquisition cost and customer lifetime value are quite popular on Google? Let us understand these metrics and its importance.
- Customer lifetime value[CLTV]:
Customer lifetime value is an estimated revenue that a company gains from its customers through their lifetime. It measures efforts in nurturing customer relationships.
A simple formula to calculate customer lifetime value is
CLTV = Annual Revenue Per Customer x Number of Years – Cost of Customer Acquisition.
Customer Acquisition Cost [Cost of Customer Acquisition]:
Customer acquisition cost is the cost associated with convincing a consumer to buy your product or service, including research, marketing, and advertising costs.
For example, if a company spent 1000 on marketing in a year and acquired 100 customers in the same year, their CAC is 10.
To run a successful Digital Marketing Campaign, data insights and measurement to calculate ROI has always been important. Most of the metric may not be direct inputs into calculating ROI but should help you predict result based on the performance of your digital marketing campaigns.
Some of the metrics to measure ROI for your Digital Marketing Campaign are:
- Unique monthly visitors cost per lead.
- Cost per acquisition.
- ROAS(Return on Ad Spend).
- Average order value or Average Ticket Size.
- Customer lifetime value.
- Lead to close ratio.
- Average position.
- CTR etc.
These metrics can help you get some insights whether your outcome from digital marketing campaigns is getting improved in terms of ROI or not.
Until and unless you try out on a different level of marketing on different platforms, returns cannot be predicted or expected.
Running any kind of digital marketing campaign without measuring the ROI is a huge gamble. if you don’t understand the reason for a specific performance or don’t know if there has been an appropriate investment in marketing, measuring ROI would be difficult.
So, In order to drive better ROI for your business, right data & insights are required to learn the performance of the digital marketing campaign.
Percoyo is a leading digital marketing agency with over 100+ clients worldwide. Its high-performing team works across multiple marketing channels, helping businesses attract, convert, and grow their Revenues. Percoyo’s goal is to build the best digital marketing company through its services as well as products.
Learn more at www.percoyo.com.
In Case you wish to work with a highly professional ROI Driven Digital Marketing company feel free to contact Percoyo Digital Marketing Company