How to properly calculate digital marketing ROI

Calculating Digital Marketing ROI: The Ultimate Cheat Sheet

Digital marketing may not be an exact science but there are ways you can measure the effectiveness of your efforts. This is called return on investment (ROI) and it basically refers to the value you get for the money you spend on your digital marketing strategies. In this article, we will look at the different types of digital marketing ROI you can calculate and explain how to do so.

Simple Return on Investment

Simple ROI Formula: Increase in Sales – Cost of Marketing/Cost of Marketing = ROI

The easiest way to look at the success of your digital marketing campaigns is to calculate your simple ROI. This is how much it cost you in marketing dollars to produce the extra sales that campaign earned you. Simple ROI is a solid estimate, but it comes with a big assumption – that your increase in sales is directly related to your marketing efforts as opposed to trends in the market-at-large or organic growth in popularity.

Example: If your increase in sales is $2,000 and your cost of marketing is $1,500, your Simple ROI is 33% ($2000-$1500]/$1500).

Campaign Attributable ROI

Basic Formula: Sales Growth – Marketing Cost) / Marketing Cost – Average Organic Sales Growth = ROI

You can get a more accurate idea of how your marketing efforts impact your sales by calculating your campaign-attributable ROI. This ROI is calculated much like simple ROI with one important exception – the cost of marketing is reduced by your average sales growth so you can see how much more your marketing campaign is bringing in on average.

For example, If we have a company that averages 6% organic sales growth and they run a $10,000 campaign for a month. The sales growth for that month is $15,000. The calculation goes:

($15,000 – $10,000) / $10,000 = 50%

And then we take out the 6% for a still stellar 44% ROI. In real life, however, most campaigns bring much more modest returns, so taking out the element of organic growth can make a big difference in the bottom-line ROI.

Email Marketing ROI

Basic Formula = Cost to create and send out email/# of actions taken = cost per email

Example: If you spend $500 on a marketing email and you get 100 people to click through, your cost per email is $5 ($500/100).

Specific Email Marketing ROI Formula: Cost to create and send email – sales specifically attributed to email = Return on Investment

In the case of email marketing, there are several forms of ROI, which include; how often your email is opened, whether recipients click through to your website, and how many people place an order or fill out a form for more information, etc. It is important to measure each of these efforts so that you can figure out what types of email tactics are most effective. Most email marketing platforms make it easy to track email marketing ROI by letting you specify and track your goals in each campaign you send out. Great platforms to use – Campaign Monitor and Mail Chimp. 

Social Media Marketing ROI

Tracking your social media marketing ROI is a lot like tracking your email marketing. In both cases, you are looking at how much you spend (on average) to entice your customers to take a specific action. Also, like email marketing, you should look at how often your followers see your post, how many click through and how many of those clicks lead to sales because each measure gives you clues to what works best for your business. Many social media platforms track your social media marketing ROI or can be configured to do so.

Content Marketing ROI

Measuring your content marketing ROI requires a little more hands-on effort, but it works the same. You will want to look at how many customers see a specific piece of content, click on it and ultimately buy. You can use Google Analytics to track these interactions. Ideally, you would be able to link back a specific sale to a piece of unique content. An easy way to do this is to create a unique landing page that has an enticing offer that aligns with the piece of content you are promoting.

Return on Influencer Marketing Investment

Influencer Marketing is one of the hottest marketing trends for both B2C and B2B marketing right now. As with any marketing strategy, measuring ROI is not an exact science because influencer campaigns are not always direct. Many times they increase exposure to your brand instead of promoting an individual product or service. Also, new customers may not click through immediately after seeing the influencer message about your brand. For ultimate ROI tracking, focus on an increase in certain key performance indicators (KPI’s):

· Direct Sales

Direct sales are the easiest influencer KPI to measure. By providing a unique referral code to each influencer and attaching some type of discount or other promotion to entice people to actually use the referral code, you can see how well the influencer campaign is affecting sales.

· Referral Traffic

You can also use referral traffic to measure influencer ROI. This is done the same way that you would calculate content marketing ROI. Look at how often you see referrals from that influencer’s network and what actions people take once they reach your site.

· Brand Awareness

Another KPI to measure in influencer marketing is brand awareness. By looking at how many people are aware of your company before and after you commission a sponsored post, you can get an idea of how much reach your influencer had. Tools like SocialMention or Trackur can measure how often your company is mentioned on different social media sites, which are both very useful when it comes to tracking brand awareness.

Do Better!

As the saying goes… “When you know better, you do better.” By calculating your digital marketing ROI, you can make sure you’re putting your marketing dollars where they will have the greatest impact. You can also spot which marketing campaigns and strategies are less effective. Over time, this leads to actionable insights that can make your company more profitable and limit wasteful spending on marketing strategies that just don’t work.

Still not sure how to track Marketing ROI for your company? Fear not, we can help. We’ve designed several packages that can help you determine how to calculate ROI and how to maximize ALL of your marketing budgets moving forward. Curious to learn more? Click below for all of the information.

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