How To Measure ROI For Your Digital Marketing

by | Feb 8, 2018 | Digital Marketing | 0 comments

ROI for digital marketing

Digital marketing is always evolving, and new elements are introduced every now and then.

This is mainly because Google’s algorithm are always changing, changing the way how web pages are being searched, ranked, or prioritised whenever someone searches on Google search engine.

Furthermore, with higher competition from businesses using the internet for marketing promotions, businesses now have to really think through how to be more effective, rather than increasing their marketing spend blindly.

What is Digital Marketing?

When people talk about Digital marketing, it usually includes the following categories:

  1. Search Engine Optimisation (SEO)
  2. Social Media
  3. Search Engine Marketing (SEM)
  4. Content Marketing

To promote a business and its website these days, a campaign could not be measured only by the volume of visitors the site has produced.

Businesses now need to add meaning to the data in order to give them an in depth picture of what is really happening to their website, their business and how their customers are interacting with it.

With the help of analytics tools like Google Analytics, these data are now easily obtained. In most businesses, the marketing department is often being seen as a cost center.

The team is often being asked about what the return on investment (ROI) is from their digital marketing campaigns.

Just how do you report ROI?

How do you prove that the digital marketing campaign is working?

How to quantify the return on investment (ROI)?

To understand what the ROI is, we need to first understand the following:

  1. What are the Goals of the business?
  2. What the business wish to get from a digital marketing campaign?
  3. What are the metrics and measurement to monitor the progress?

For this we need to look at the Key Performance Indicators (KPIs) and the goals for each one. Here are some types of key performance indicators:

  1. Performance based – Traffic, Leads, Reach, Impressions
  2. Channel Based – Website, Blog, Social Media, Search Engines
  3. Source based – Direct traffic, Organic search, Referrals, Email, PPC
  4. Campaign based – Lead Generation, Click Through, Conversions, Conversion Rates

As Digital Marketing comprises various components, channels and sources, it is important to have a birds eye view on how each components is performing.

Once the KPIs are agreed upon, the next stage is to measure them.

Marketing and Sales departments have to work closely together to define, measure, and adjust their strategies with the data to out-wit, out-perform your competitors.

How To Measure ROI For Digital Marketing?

There are several ways to approach calculating your Marketing ROI. Depending on your type of business, you may choose one method over the other. For starters, you can use this one:

(Sales Growth – Marketing Investment) / Marketing Investment = ROI

ROI is typically expressed as a percentage.

Here’s an example:

Let’s say your company has invested $6,500 in a particular Marketing campaign. This campaign has generated $18,826 in additional sales for your business.

Now let’s work these numbers into the formula:

(18,826 – 6,500) / 6,500 = 1.89 = ROI of 189%

This means that for every one dollar you put into this Marketing campaign, you get one dollar back and then an additional $0.89.

This is great news for businesses who sell one-time services or products, but what if your business model is based on recurring sales, such as a SaaS startup?

In this case, you might want to use the Customer Lifetime Value (CLV) formula here:

(Customer Lifetime Value – Marketing Investment Per Acquisition) / Marketing Investment Per Acquisition = ROI


Let’s say you run a SaaS startup and your average customer subscribes to your service for 20 months and you average $85 in revenue per customer.

Using this formula (Average purchase value * Average number of repeat purchases), that means your average customer lifetime value is $1,600. ($80 * 20 months).

Now let’s say your Marketing campaign costs you $1200 per month and acquires 5 new customers each month. That’s an average cost of $240 for each new customer ($1,200 / 5 customers).

Plugging these figures into the formula, we get:

(1,600 – 240) / 240 = 5.67 = ROI of 567%

I think you get the idea by now. 🙂

By now you should be able to see why businesses need to focus on customer retention, as well as customer acquisition, because it increases the customer lifetime value. Especially if you are running a recurring sales business. This will mean alot!

How to Track Your Marketing Performance

Now that you understand how to measure ROI, how are you measuring performance?

You have to get a system in place where you can start measuring, and tracking everything you can to make the most of your Marketing campaigns and to get the most accurate calculations of ROI.

Use Google Analytics to your advantage

Most people know that Google Analytics is an easy-to-use and useful tool to see how many visitors your site is getting, but there’s a lot more in Google Analytics than purely traffic data! With Google Analytics alone you can see:

  • How many people are visiting your site
  • Where your visitors live
  • Which devices they are viewing your site from.
  • Which websites are sending you referral traffic
  • Which Marketing tactics are driving the most traffic to your site
  • Which pages on your website are the most popular
  • How many visitors you have converted into leads or customers
  • Where your converting visitors come from and go on your website
  • How you can improve your website’s speed
  • What blog content your visitors like the most

There’s much more, but these are the variables that most businesses track. Do you see how not only Google Analytics helps you calculate your ROI but gives you valuable information that can help you increase your ROI? Not sure how to get started with Google Analytics? Read The Absolute Beginner’s Guide to Google Analytics by Moz.

How Bitly can help to improve your click-through rate by 50%?

If you’re hooked on gathering raw marketing data and tracking everything in your digital portfolio, this is a tool you should go for. Bitly offers a free tool that allows you to shorten links for sharing on social media.

On top of that, now they have expanded to premium products that allow you to measure the engagement of your audience through the links that you share.

Another cool feature is they let you create a custom brand link.

By sharing your custom links in social media campaigns, email Marketing campaigns, and in the author bio for your guest posts — you can measure the engagement of your audience across all platforms and devices.

The key thing is: the more information you have, the more accurate your ROI calculations are!

Key Takeaways

Monitor Your Goals

It is important to measure your goals on a frequent basis, for instance website traffic could be on a daily or weekly basis, not on a monthly basis as this tends to draw a straight line graph in Google Analytics.

You will need to see what causes fluctuations in your visitor numbers, why are your conversion goals different – is it due to a national holiday, are Mondays notoriously busy, or quiet; are Fridays the same?

By monitoring your KPIs and results, we can manipulate your campaign to make changes to these.

Gather Data

Data gathering requires interactions from your sales managers, inbound leads identified, outgoing leads identified and recorded.

What is an outgoing lead – is this one from your sales people, cold calling prospects? Inbound from social media and website contact?

Reporting On The Performance

Reporting on such targets and goals, KPIs and information should be as often as possible, monthly is ideal, to track an ongoing campaign, to make changes each month increase in targeting goals that are working and manipulate those that are achieving less.

Calculate Your ROI

By calculating your spend on digital marketing and the sales increased, can you determine whether your digital marketing campaign was successful.

Not Satisfied With Your Inbound Marketing ROI?

After calculating your ROI, you might be a little disappointed on your results?

No problem!

The whole point of calculating your ROI is to have a clear picture of what’s going on so you can figure out how to maximize your ROI.

If you want to find out more about how to increase your ROI on digital marketing, speak to our marketing team, who will be happy to advise you on the next steps to take.

Happy selling!