top of page

Marketing Effectiveness: Calculating ROI from Digital Marketing Campaigns

When it comes to measuring campaign success from marketing efforts, quite a few challenges lay on your path. I have spoken to several CEOs and marketing directors. One thing they all mention is how complex it is to show the effectiveness of marketing.

Marketing can be horribly expensive, so you need to calculate carefully which marketing efforts are leading to financial benefits rather than just wasting money on campaigns. That means calculating your ROI, or return on investment. ROI is a ratio or percentage between your profit and spend which tells you how much you’ve gained or lost from your work relative to the money you’ve spent. This will help direct you towards which part of your campaigns are worth keeping, which to improve, and which to throw out the window altogether.

The formula typically works like this:

(Sales growth - Marketing cost)/Marketing cost = Marketing ROI.

Ideally, the higher the ROI, the better. If you’re making less than twice what you spend, it’s time to have some words with your employees.

You have to be careful as to what you consider a “return”. Sure, you may feel as if you were successful from your sudden increase in likes and comments, but you probably won’t feel that way when you see that half those comments were angry and along the lines of “never buying again!” That’s probably not what you want, rather you’re probably looking for brand awareness, sales, customer retention and customer satisfaction.

Unfortunately, the formula above doesn’t tell you everything. The “Sales growth” part is the most complicated part, since it’s not always clear how much of your growth was attributable to marketing. It’s also not always monetary either. Depending on your goals, you could be looking for website traffic or amount of subscriptions or opt-ins. Maybe you’re looking for higher engagement rates on your blog posts and social media posts. If that’s your situation, ROI won’t be too difficult to figure out.

If you’re looking for your monetary ROI however, that’s where things become muddier. How do you know what led to the sudden $2M in profits since last year? As a marketer, you’d like to think it was due to your genius ideas, compelling copywriting, and discerning taste in influencers, but what if it was due to the newly-hired, unusually persuasive counterparts in the sales department? Was it your massive colorful billboards or your catchy magazine ads that drove most of these gains? What if something in society changed to make your product twice as attractive -- no marketing or sales needed? And what if this change happened right after launching your new influencer marketing campaign, making you think that’s what drove the profits?

ROI can be extremely complex, but it’s important you figure it out to the best of your ability. You have to be careful choosing what your KPIs are in order to move forward with this. If your PPC campaign is a big deal, watch your CPA (cost per acquisition). If it’s your SEO campaign, pay attention to your keyword rankings. Cost per engagement, cost per acquisition, and cost per lead and help you measure your social media campaigns.

Because of this complexity, marketers often split up how ROI is measured by using different metrics, some financial, some not. They usually pay close attention to different stages in the buyer’s journey, especially:

  • Awareness,

  • Engagement

  • Consideration.

They’re all part of the marketing funnel, so marketing campaigns and KPI’s should be created for each stage. Not all campaigns are conversion driving, rather some are mainly created to get users into the marketing funnel and lead them to conversion, as it takes more than 1 touch point usually to get users to convert.

Awareness: New website traffic is a critical metric in measuring awareness. Using UTM parameters, you can break down the traffic by channel, campaign, and even term. You can attribute traffic back to the sources and find out your most effective channel

Example: Website Traffic by Source
Example: Website Traffic by Source

Website traffic is just the beginning of the customer journey and doesn’t tell you how much money you’re about to make, but greater exposure is a necessary first step in growth and that s a goal in itself, at least for a while. That’s why brands often pay thousands to millions of dollars for celebrities to post photos with their products. One common metric calculated at the awareness stage is cost per impression. How many impressions did your digital campaigns get relative to how much you spent in total? Divide the total cost with the amount of impressions to find out. Delve into this more intricately -- look at how many new vs returning visitors you have and how long they stay on each page.

Engagement: This is when you’re looking at the activity rather than just views. How many social media likes, follows, and shares did you get? How many people opted in into your newsletters? How many people commented and how many of those were positive? For ads you want to look at your clickthrough rate (CTR) and measure it against industry benchmarks. At the engagement stage you can also run lead generation campaign and a important metric to calculate here is cost per lead. In order to have a positive ROI, cost per lead should be lower than the eventual sale price upon closing the lead.

Conversion: Now we’re at the bottom of the marketing funnel, the end of the customer journey. What’s the percentage of leads that actually bought something? Of the ones who clicked? Are you looking for purchases from specific individuals or demographics?

An important metrics to calculate here is the conversion rate. You can also drill down to calculate conversion by channel, device, audience etc to get more insights within your campaign. Understanding all these details can help you tweak the campaigns channel or messaging to help deliver better results.

Example: Conversions on website by marketing channel
Example: Conversions on website by marketing channel

Customer Lifetime Value: There’s something a little complex called the Customer lifetime value (CLV) This is one you’ll have to wait a while to calculate, but it’ll be worth it. Like its name says, the customer lifetime value refers to the value a customer generates for you over time. Ideally, you should keep your customers coming back to you as long as they can.

There are multiple ways to calculate the customer lifetime value. You’ll usually need these metrics: average returning customer purchases, amount spent per month or year, and the average amount per transaction. One example of CLV is $300 for a customer who buys one $100 (on average) purse from you over the course of three years. This value should be a lot more than the cost to acquire the customer.

An effectiveness of a marketing campaign depends on several factors like the campaign messaging, timing of execution, audience, marketing channels chosen etc. Identifying the goals of the campaigns, finalizing the KPI’s, and measuring the performance on a regular basis is key to making sure that the campaign delivers results. Constant data evaluation also enables us to be agile and tweak the campaign messaging and channel in regards to the data.

Keeping this in mind, at Bon Digital, our clients get access to a dashboard where they can see real time data for their SEO campaigns, Website Analytics, PPC, Organic and Paid Social Media campaigns including conversion tracking. Clients have full transparency into their data and can see how our marketing campaigns are helping them bring relevant traffic to their site, as well as how they’re helping to convert that traffic into leads and sales.

Here’s an example of client dashboard from us:

Example: Marketing Dashboard with KPI's and Real-Time Stats.
Example: Marketing Dashboard with KPI's and Real-Time Stats.

140 views0 comments


bottom of page