What is ROI in Digital Marketing and what we should know?

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Make sure you know what online marketing metrics you need to know and measure to show your ROI.

Using digital marketing and the metrics that show how well it worked and how much money it made are changing quickly.

Over the last few years, and especially thanks to COVID, the move to digital has come a long way faster than anyone thought.

Any marketer who has tried to use Google Analytics can tell you that there is a lot of data to look through.

In order to cut through the noise and accurately measure the ROI of your digital marketing efforts, it’s important that you know which metrics you want to keep an eye on and which ones you don’t want to.

Use the information in this article to figure out how well your digital marketing is working and where you might need to make changes.

What is ROI?

Return of Investment

In return for your money,
An analysis of how much money an investment is worth compared to how much money it costs. When you figure out your return on investment, you divide profit by the cost of the project.

The formula: profit minus cost / cost

Which metrics can help you figure out how much money you made?

  1. CPL or Cost per Lead
  2. Lead close rate
  3. CPA or Cost per Acquisition
  4. AOV or Average Order Value
  5. CR or Conversion Rate
  6. Bounce Rate or Exit Rate
  7. CTR or Click-through Rates
  8. CLV or Customer Lifetime Value
  9. NPS or Net Promoter Score
  10. Project/Campaign, time and returns
  11. Traffic to lead ratio
  12. ROAS or Return on Ad Spend
  13. Overall revenue
  14. CRR or Customer Retention Rate

CPL

Cost per Lead

How much are you paying for each lead if your website is getting people to sign up for things?

If the cost of each lead is more than the money you make by closing leads, that means you’re getting a bad return on your money.

If you know your cost per lead, you can figure out how well your marketing efforts are working and how much money you’ll need to make more strategic and budget decisions.

Lead close rate

Too often, this happens offline, preventing data from being linked into analytics or online data collection.
That’s OK, but keep a watch on your lead closure rate and compare it to the leads generated.
This will ensure your digital marketing efforts produce profitable leads.
This data can also be used to monitor new digital marketing efforts.
If you suddenly get a flood of new leads but they don’t close, you may need to tweak your targeting.
Close rates can also reveal how sales teams and people convert leads into sales.

CPA

Cost per Aquisition

Using the facts above, calculate your cost per acquisition.
Simply divide your marketing costs by the amount of sales generated.
You now know how much a sale costs, which can help you calculate your ROI.
Many digital marketing use CPA models, where they only pay for leads or sales that meet a certain goal. Aim for conversions or pre-determined outcomes.

AOV

Average Order Value

While you want to see the volume of your orders rise, paying attention to the value of the average payout may yield considerable returns. AOV is a crucial measure that may assist marketers maintain track of earnings and manage sales increase and profit report.
A minor increase in average order value may bring in hundreds of dollars of extra income and can sometimes be as easy as enhancing user experience and creating up-sell possibilities.

CVR

Conversion Rate

Incorporated digital marketing techniques are now required for overall success.
CMOs are increasingly striving to understand which channels work best and which are the most cost-effective.
We all want to know where our traffic comes from.
This data shows us where our consumers are and/or where our marketing efforts are generating the most discussion.
But that’s not all.
Conversion rates can tell you more about success and where the finest chances are.
Assume that 75% of your traffic is organic and 25% is paid. But your PPC conversion rates are twice organic.
This teaches you one thing: Invest in PPC. You’ve boosted your ROI by increasing PPC traffic to match organic.
Accounting for channel interactions and which channels might impact others with conversion lift is important.

Bounce Rate or Exit Rate

The typical post-click landing page sees 9 out of 10 visitors bounce. Some depart because you’re fooling them (knowingly or unknowingly), and others because you’ve worn them out.
Whatever the cause, it’s fixable. To reduce post-click landing page bounce rate, encourage users to browse other web sites. Doubtful. Incorporated digital marketing techniques are now required for overall success.
CMOs are increasingly striving to understand which channels work best and which are the most cost-effective.
We all want to know where our traffic comes from.
This data shows us where our consumers are and/or where our marketing efforts are generating the most discussion.
But that’s not all.
Conversion rates can tell you more about success and where the finest chances are.
Assume that 75% of your traffic is organic and 25% is paid. But your PPC conversion rates are twice organic.
The takeaway is simple: Invest more in PPC. You’ve quadrupled your ROI by increasing PPC traffic to match organic.
Accounting for channel interactions and which channels might impact others with conversion lift is important.

CTR

Click-through Rates

Blogs for example, are a terrific method to promote your brand and thought leadership while driving visitors to your site.
Blogs are infamous for having high bounce and leave rates, but that doesn’t mean you have to accept them.
Instead, utilize them to create blog traffic targets for your main site.
A minor boost in blog click-throughs may result in new business at little or no expense.

CLV

Customer Lifetime Value

You can’t measure marketing ROI unless you know how much the typical client spends throughout their lifetime.
Assume a new sale or customer costs $100. But they only spend $100.
When you include in the costs of everything else, that appears like a net loss.
If you knew that consumer would spend $100 every six months for five years,
That client’s lifetime value is $1,000.
Now that’s not so awful for $100, is it?

LTV = Average Revenue Per User (ARPU) x 1/Churn

That doesn’t mean you should lose money on every first-time consumer, but if the initial investment pays off in the long run, you may use the loss as a marketing cost.

NPS

Net Promoter Score

Customers are asked whether they would suggest a product or service to others.
The ratings are a strong predictor of client loyalty and satisfaction.

NPS = % promoters v % detractors


Customer service strategies and techniques may be improved by tracking promoters vs detractors.

Project/Campaign, time and returns

Did you know how much time each employee put into a project or campaign?
To get the most out of each employee’s skills, make sure they are working on worthwhile projects.
In a team of programmers, who do you want working on the projects that bring in the most money?
Of course, the experts.
You can assign the appropriate employees to the right projects once you know their worth.

Traffic to lead ratio

An rise in website traffic indicates successful digital marketing strategies. Those figures effect your company’s bottom line?
The traffic to lead ratio is another technique to evaluate your marketing operations. This KPI tracks the number of visitors that become leads.
Assume your website has 1,000 visits this month. 100 visits became a lead. This month, you would have a 10:1 traffic to lead ratio, or a 10% conversion rate.

ROAS

Return on Ad Spend

Return on Ad Spend (ROAS) measures the effectiveness of advertising and sponsored initiatives.
Digital marketers can see their ROI.
This is critical for comparing results, comparing channel expenditure, and anticipating future results.
Most marketers believe in a 3X return on investment.

Overall Revenue

Marketers are continually challenged by sales performance comparisons.
When sales do well, marketing receives little attention.
When sales are slow, marketing receives greater attention.
Do all you can to prevent these disputes.
Could be a campaign, a marketing touch or asset.
Ensure your marketing and sales teams are monitoring and reporting revenue together.
Define the standards and responsibilities for all marketing activities that effect or influence sales income.

CRR

Customer Retention Rate

How long do customers stay?
It measures the company’s client retention rate over time.
The reverse of turnover rates is retention rate, which represents the proportion of customers retained.

For example, if you pay for advertising in a mobile game. One of your objectives is to have a certain proportion of visitors return the following day to play the game. So that will be the condition 7 day RR to be 15%…which means 15% of the users which are installed the app to return till 7 th day after the installation.

Customer Retention Rate Formula

[ ( Existing at the given period minus new customers) / Initial Number] x 100

Example:

Let’s say you are an owner of a retail outlet store, at the start of the year, January 2020,  you calculated that you had 70 customers, now when you are re-calculating, you realized that you have 100 customers at the end. Whilst looking through your customer profiles, you find that 40 of them were new first time customers. 

[(100-40) / 70] x 100 = 85.71%

This shows you kept 85.71 percent of your consumers, compared to the industry average of 32.7 percent.

By Sarah Kuhn

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