What is ROI in digital marketing and what we should know?


ROI is a way to figure out how much money your digital marketing efforts bring in. It’s called “return on investment,” and it’s the most important metric when it comes to evaluating whether or not your marketing campaigns are working.

The way to calculate ROI is by dividing the total amount of money you spent on your campaign by the total revenue you generated from that campaign. So if you spent $500 on a campaign that resulted in $1,000 in revenue, your ROI would be 20%.

So what does this mean? If your ROI is negative, then you’re losing money. You can’t afford to keep doing that. But if it’s positive, then congratulations! You’ve found something that works for your business.

A lot of people get confused about what counts as “revenue” when calculating ROI—they think that only sales count toward revenue (and thus count toward their ROI) while other kinds of results don’t contribute at all (like website traffic or social media engagement). That’s not true at all! All of these things should be part of your calculation because they’re all important pieces of information about how well your digital marketing efforts are working.

1.What should we know about ROI?

There are many different metrics that can help you figure out how much money your company made as a result of an online marketing campaign. The most important thing is that you know what these metrics are and how to use them effectively.

First off, there are some key things that can affect your ROI:

Your budget: If you have a limited budget, which is often the case for small businesses, then it’s important to make sure your campaigns are successful enough for them to pay for themselves.

Your goals: If your goal is to increase brand awareness or get more people to sign up for membership at your company, then you’ll want a different kind of ROI than if your goal is to sell more products or services directly from an advertisement.

The length of time between when you start running ads and when they stop running: If you run ads with a short lifespan—such as two weeks—and they’re successful, then they may not be able to give you much information about their effectiveness over time.

2.What do CPL, CPA, CR, and ROAS all mean?

You may have heard these terms thrown around in marketing circles, but what do they really mean?
There are a lot of acronyms in the digital marketing world.

It’s easy to get lost. So, let’s take a moment to break down the top four acronyms you need to know:

CPL—Cost Per Lead

CPA—Cost Per Action

CR—Conversion Rate

ROAS—Return On Ad Spend

These four terms are used to measure various aspects of your marketing campaigns and can help you understand how well your campaign is performing. Let’s break them down one by one!

CPL stands for cost per lead. It’s a ratio that shows you how much it costs to get a new customer. The cost is divided by the number of leads that came through your ad campaign. It’s important to track this because it can help you figure out if your campaigns are profitable.

CPA stands for cost per action and it tells you how much it costs to get each conversion (e.g., someone signing up for your newsletter). It’s calculated by dividing the cost of your ads by the total number of conversions you receive from those ads.

CR stands for conversion rate, which is simply the percentage of people who click on your ad and then convert into customers or leads later down the line. You can use this metric to see how well your ads are working at getting people interested enough in what you’re selling so they’ll buy something from you!

ROAS stands for “return on ad spend,” which is the amount of money you make from each dollar spent on ads. This metric is often used to compare different types of advertising, like whether you get more value out of direct mail or digital ads.

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

1.Lead close rate

2.Average Order Value

3.Bounce Rate or Exit Rate

4.Click-through Rate

5.Customer Lifetime Value

6.Net Promoter Score

7.Project/Campaign, time and returns

8.Traffic to lead ratio

9.Overall revenue

10.Customer Retention Rate

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.


Even though you want the number of your orders to go up, paying attention to the value of the average payout could pay off in a big way. AOV is a crucial measure that may assist marketers in maintaining track of earnings and managing sales increases and profit reports.
A minor increase in average order value may bring in hundreds of dollars of extra income and can sometimes be as easy as enhancing the user experience and creating up-sell possibilities.

Bounce rate

The typical post-click landing page sees nine out of 10 visitors bounce. Some leave because you’re fooling them (knowingly or unknowingly), and others because you’ve worn them out.
Whatever the cause, it’s fixable. To reduce the post-click landing page bounce rate, encourage users to browse other web sites. Doubtful. Digital marketing techniques that are integrated 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 best chances are. Assume that 75% of your traffic is organic and 25% is paid. But your PPC conversion rates are twice those of organic. The takeaway is simple: Invest more in PPC. You’ve quadrupled your ROI by increasing PPC traffic to match organic. It is critical to account for channel interactions and which channels may have an impact on others in terms of conversion lift.


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.


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.


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 increase in website traffic indicates successful digital marketing strategies. Those figures affect 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 received 1,000 visits this month. A lead was created after 100 visits. This month, you would have a 10:1 traffic-to-lead ratio, or a 10% conversion rate.

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.


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


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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