Introduction
In this digital marketing world, we all want to know what our ROI (return on investment) is. It’s a simple formula: “What did we spend? And how much did it generate us back?” In this article, I will explain how to apply the ROI formula in digital marketing and which tools can help you measure your return on investment (ROI).
The ROI formula
The ROI is a measure of how much money you are making, and it’s calculated by comparing revenue to cost. If you spend $100 and make $200, your ROI is 200%. The higher the percentage, the better!
ROI by marketing channel
The ROI of a channel depends on the type of business you have. For example, if you’re selling something that can be sold over the internet and has no physical presence like software, then your ROI will be higher when using search engine marketing (SEM), such as Google AdWords or Bing Ads. If your product is something that people would rather touch and feel before purchasing, then social media advertising would not be as effective for you because social media has no physical products to show customers; however, it could still work well if your goal was to build brand awareness or generate leads.
When measuring digital marketing campaigns by channel, there are many ways to do so:
- Cost per lead generated from each source
- Cost per sale generated from each source
The conversion rate of each channel is determined by dividing the number of conversions (purchases) by the number of leads generated.
For example, if you generated 100 leads from Facebook and 10 of them purchased your product, then your conversion rate would be 10%. This can help you determine which channels are more effective for generating conversions than others. Another way to measure the effectiveness of each digital marketing channel is by looking at its cost per acquisition (CPA). This metric takes into account both the costs of running an ad as well as how much revenue it brings in. For example, if you spend $500 on a campaign and receive $1,000 in revenue from those same customers within 30 days, then your CPA would be $500.
Social Media ROI
Social media is a great way to build awareness of your brand, drive traffic to your website and interact with customers. It’s also an excellent way to get feedback from customers, generate leads, and even sell products online.
The most important thing is to make sure that you have a plan for social media before you start investing time in it–and if possible, have some kind of system in place that can help track the ROI on those efforts so that they’re not wasted (or worse: counterproductive).
Search Engine Optimization ROI
When it comes to SEO, you can use Google Analytics to measure traffic and see how many people visited your website because of a search engine result. You can also use Google Search Console (formerly known as Webmaster Tools) to see which keywords are driving traffic and conversions on your site by looking at the “Search Engine Optimization” section in the left sidebar.
You’ll find these metrics in two places:
- In Analytics under Acquisition > All Traffic > Channels > Organic Search
- In Search Console under “Search Traffic”
Email Marketing ROI
Email marketing is one of the most effective ways to market to your customers. It’s also a great way to build relationships with them, stay in touch with them, and inform them about new products and services. To measure the ROI of email marketing, you need to know what goals you want your campaign to achieve:
- Increase sales?
- Drive traffic to another website or landing page?
- Get people into stores more often?
If it’s the latter two options, then consider measuring footfall at physical locations (for example, by using exit surveys). If it’s the first option, then look at sales figures before and after running an email campaign against similar periods without running one for comparison purposes.
Google Analytics
Google Analytics is a free tool that can be used to track website traffic, conversions, and more. It’s an essential digital marketing tool for any business with an online presence.
Google Analytics has become the industry standard in web analytics because it’s easy to use, affordable, and provides actionable insights into your customers’ behavior on your site or app. You can use it on websites (including WordPress), mobile apps (such as iPhone or Android), and even eCommerce stores like Shopify!
Google Analytics allows you to measure ROI by giving insight into how much revenue each channel brings in so that you know which channels are working best for your business.
UTM Codes
UTM codes are used to track the source of traffic, medium, and campaign. The UTM code is placed at the end of your URL in order for you to track it.
For example: If you have an email marketing campaign that sends people from your website over to a landing page (a specific page on your website), then this would be considered direct traffic because someone clicked on an email link and came directly to that landing page. You would add “utm_source=email” to the end of your URL so it looks something like this:
http://www.website/landingpage/?utm_source=email
Use the right tools to measure your return on your digital marketing investment
There are many tools available to measure your return on your digital marketing investment. However, not all of them are created equal.
The right tool for you will depend on the type of data you want to track, how much time and effort it takes to gather that data, and whether or not there is already a solution in place that can provide this information for free (or very low cost).
For example: if all you need is basic analytics from Google Analytics, then that’s great! You have an easy way to track website traffic and conversions, which will help determine where visitors go once they land on your site as well as what content they consume first before making a purchase decision or signing up for an email list subscription.
Conclusion
The takeaway is that there are many different ways to measure your ROI in digital marketing. The most important thing is to use the right tools for each channel and make sure they’re set up correctly so that they can accurately reflect what’s happening in your business.