ROI Tracking: How to Measure the ROI of Your Digital Marketing Campaigns?
There is no shortcut to boosting your brand’s reputation in a day. But rather a series of tiny steps in the right direction that make a bigger impact. And when it comes to improving your brand’s presence online, the key is digital marketing. Digital marketing is a vast umbrella that covers all a business’s online needs. It impacts your brand’s awareness, the impact it has on the target audience, the sales it generates, and customer loyalty.
Well, that’s a lot under a single roof, but that’s the power of digital marketing in today’s world. Hence, while choosing the right digital marketing agency, you need to be agile and smart.
Now, when it comes to forming a partnership with a digital marketing agency, it is equally important to measure the benefits of this partnership. In the business world, one of the key factors is ROI tracking, along with other supporting factors like customer satisfaction, business growth, and brand awareness.
ROI in digital marketing is a direct indicator of a campaign’s progress and success. However, calculating it always isn’t straightforward. This article will explain all you need to know about ROI tracking for digital marketing campaigns.
How do I calculate the digital marketing ROI?
The most essential part of ROI analysis is a clear calculation of ROI. This enables us to get a clear figure for the ROI, which in turn affects the decision and future planning. Though there are several marketing ROI calculators available online, a simple formula helps you do the work yourself.
ROI = (Net Profit / Online Marketing Costs) x 100
Net profit is the initial investment subtracted from the profit earned. Online marketing costs include the initial investment and the total expenses you incur for this campaign. By applying this formula, you will get a percentage of the profit earned by your marketing campaign.
However, in cases where there is no clear number on the profit earned and you need to identify the success level of an online marketing campaign, The ROI formula works a bit differently.
ROI = [(Number of leads x lead conversion rate x average order value) – Cost of Marketing] / Cost of Marketing x 100
This formula involves a lot more terminologies than the previous one, but it is a smart way to calculate the progress of your online marketing. Here is how you identify each element of this formula:
- Number of leads: the number of website visitors who showed interest in your product or service. This can be checked by visitors to your web page through tools like Google Analytics.
- Lead Conversion Rate: not every lead converts to a customer, and this is a given law of digital marketing. Hence, the lead conversion rate is a percentage of the total number of leads. That’s why this figure is the most important when calculating ROI for an online campaign.
- Average Order Value: the average amount generated per sale. To find out this amount, divide the total revenue generated by the number of lead conversions.
- Cost of Marketing: from start to finish, the total amount spent on a campaign accounts for the cost of marketing. This includes planning stage costs, salaries, ad campaigns, paying an outsourced marketing agency, purchasing tools, etc.
Even though these formulas are easy to use to generate a clear-cut answer on ROI, the truth is otherwise. As discussed later in this article, ROI tracking for digital marketing campaigns is very difficult because of the many intangible factors involved. Therefore, besides these formulas, there are some other tools for effective ROI measurement:
Links with UTM Parameters
This is a very helpful move by Google Analytics. Now, it is possible to directly track digital marketing campaigns with each click on the website. Urchin Tracking Module (UTM), a long URL with a question mark at the end, is a tool by Google Analytics to track every click on a website. When a user clicks on a website with UTM, it becomes possible to track which campaign generated the lead and where the user is located.
Google also explains all about the Urchin Tracking Module in its Urchin Guide. Though the purpose of UTM is to identify the source of traffic, it also works great in determining the success level of a campaign.
Digital Tracking Pixels
Digital tracking pixels are used to track a user’s behavior on a website. The time they spend, how much they scroll, how many clicks they make, and the number of pages visited. Digital tracking pixels can also be used to keep track of sales and leads, which helps in keeping track of ROI.
Using a CRM Tool
CRM tools are very helpful in tracking user behavior from the first click until the sale is generated. These tools can effectively maintain individual sales data, thus identifying the region with the most sales or the person with the most purchases. This is great in two ways. First, it not only tracks but also keeps a record of sales generated. Secondly, this record helps in remarketing to convert a one-time customer into a loyal buyer.
Google Analytics vs. CRM to Calculate Marketing ROI
Google Analytics differs from a typical CRM in many ways and cannot replace the functionality of CRM. But for marketing ROI purposes, many businesses rely on Google Analytics rather than a CRM-Google Analytics partnership.
While Google Analytics itself provides sufficient data on the behavior of a visitor, CRM can track, identify, and maintain the entire record on an individual level. Thus, by integrating Google Analytics with a CRM tool, you can not only know and identify your audience at a personal level but also devise more targeted marketing strategies on an individual level.
The Importance of Measuring Marketing ROI
The intention behind ROI tracking in digital marketing serves lots of purposes for businesses and digital marketers. Without tracking ROI, finding the impact and success level of a campaign would be impossible. Moreover, marketers won’t be able to decide whether to proceed with the same marketing tactics or improvise in a different direction. Besides this, here are some in-depth reasons why ROI tracking is important:
1. Personalized Data
ROI tracking for a digital marketing campaign works differently than for a regular campaign. Since you are analyzing user behavior more than sales, a check on ROI can help you identify your potential customers. This gives us a chance to turn those customers into loyal buyers.
2. Future Marketing Tactics
Sometimes a marketing trend could be booming well for others, but when it comes to your business, it could be a huge failure. Without ROI tracking, it would be hard to identify how a campaign works for your business specifically.
3. Customer Behavior
Tracking customer behavior on your website and getting a chance to know what part of your campaign intrigues most users helps devise future marketing practices.
4. Remarketing
Even with traditional marketing, remarketing isn’t a huge success because you don’t get as much data as digital marketing provides. Thus, tracking ROI done with a CRM specifically helps in reaching a customer again with an even better offer.
What You Should Know About Return on Marketing Investments?
Imagine you purchased ingredients for a cake, baked it, included the labour cost, and charged a fair amount. The profit you earned gave you a clear result on ROI. This story is true in every purchase-sale situation. But when it comes to ROI tracking for digital marketing campaigns exclusively, the story is a bit different.
To be fair, it is impossible to fully understand and measure the ROI of a marketing campaign. Because even if a campaign couldn’t generate the desired sales or a huge positive percentage, it could have reached thousands of people worldwide. And if not now, later down the road, many people could purchase your product because of that one campaign or ad that was released months ago.
This is a very common scenario in digital marketing.
Next, due to the many intangible factors involved, it is hard to calculate actual digital marketing campaign ROI. As the spread of a digital marketing campaign is across multiple platforms, it reaches the desired eyes and ears through a variety of channels, such as websites, social media, TV commercials, SMS, and word of mouth. Thus, gathering income and success rates from all these channels is indeed impossible.
The third reason that becomes a hindrance to calculating a clear ROI is that the payback cycles in digital marketing aren’t as prompt as in traditional marketing. This is due to several reasons:
- Quicker sales in some regions than others
- Seasonal differences around the globe
- Differences in trends
- Advertising network policies, etc.
The Success of Digital Marketing
Successful digital marketing is like planting a seed that grows into a tree and serves fruit life-long. Brands that have gotten into digital marketing partnerships with smart firms have created campaigns that have ruled for decades. While immediate outcomes and tracking short-term ROI aren’t smart moves for digital marketing campaigns, they generally give an idea of which direction a campaign is headed. This way, businesses can decide whether to continue down the same road or not.