How to Measure Digital Marketing ROI: 5 metrics you need to track

digital marketing roi sales funnel

Digital marketing ROI is a value that has been increasingly difficult to measure. With new channels, new platforms and new advertising opportunities, linking all of these into one marketing report is tricky.

However, understanding your return on investment, or ROI, is essential to seeing whether you’re getting your money’s worth from your marketing campaigns and advertising.

Editor’s note: Know what digital marketing ROI is and want to get straight to attribution? Book a demo to find out how you can attribute your revenue directly to your marketing channels, campaigns and keywords. Or, find out more about our closed-loop marketing framework by downloading our eBook.

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What is Digital Marketing ROI?

Digital marketing ROI, which stands for return on investment, is the measure of profit or loss generated by your digital marketing campaigns. It looks at the amount of revenue generated compared to the amount of money invested.

If you have a positive return on investment, then your campaigns are bringing in more money than you are spending on them. And that’s where you want to be!

 

How does understanding your digital marketing ROI help?

Demonstrating digital marketing ROI for all of your channels, campaigns and advertising is important because without it, you’re marketing blind. By understanding your successes, and your pitfalls, you can tweak your strategy and your planning to help grow high-quality leads, and ultimately grow revenue.

Knowing your ROI not only means you can optimise your current budget, it also means you can make quick decisions on where to allocate your budget in the future.

According to TrackMaven, 71.1% marketers find attributing social and content to revenue to be a difficult challenge. They also find attributing leads to revenue difficult with over 45% agreeing with the sentiment.

digital marketing roi top challenge for marketers

Not only this, but many of the other challenges listed above can be easily solved with the right KPIs to track digital marketing ROI.
Even if you’re not an analytical marketer, by tracking the below KPIs, you’re sure to be able to accurately measure both the value of your lead, and revenue generation.

So let’s get straight into it.

 

How to measure your digital marketing ROI

Instinctively, when measuring digital marketing ROI, you’ll want to look at KPIs that link to leads, think conversions. However, while these metrics are essential, they don’t tell the full picture. You can of course, measure your revenue impact if you’re an eCommerce marketer, directly on analytics software like Google Analytics. But what if you use offline conversions to drive sales?

If you have a sales team fielding form submissions or phone calls, then it can be hard to track. We’ll walk you through exactly what you need to be measuring for an accurate representation of your digital marketing ROI.

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Conversions

Whether it’s phone calls, form submissions, content downloads or newsletter subscriptions, understanding your marketing’s impact on your conversions is essential.

Setting up goals in Google Analytics is pretty simple and will give you great coverage on how your marketing is working to generate leads.

 

Not getting oversight of your leads? Here’s how to set up form submission tracking and live chat measurement.

 

Once your goals are set up, you can view your conversion data across a multitude of reports. You can see it by marketing channel or by landing page meaning you can begin to understand which pages and channels are working best for you.

Make sure you’re tracking these numbers month on month for an idea of how many enquiries your sales team are fielding each month, quarter and year.

 

Cost per lead

Now you know how many conversions you’re getting, you’ll want to know how much they’re costing. If you’re using a budget for pay-per-click to drive lead generation, then understanding your cost per lead is essential to learning whether your adverts are working.

If you’re spending £100 on paid adverts to generate 4 leads, then that’s a cost per lead of £25. Of course, you want to be generating high-quality leads for the lowest possible cost.

CPL formula for proving digital marketing ROI

 

Want to learn more about generating high-quality PPC leads? We spoke to Sophie Logan, PPC Manager, at Adzooma for her insight.

 

If you find your cost per lead is higher than its potential value, then you need to evaluate your marketing efforts. With marketing attribution, you can assign the actual revenue to your leads when they close. You can also track offline conversions which means your CPL is going to drop down too, as you’re getting a true visualisation of your marketing’s impact on your revenue generation.

This means you can get a true cost per lead, and a view of the full picture. If you want to learn more about marketing attribution metrics, skip ahead.

 

Lead close rate

Ok, so you now know how many leads you’re getting, and at what cost. But how many of those leads are converting into sales?

Chances are this information will be within your CRM such as Salesforce, or you may have to request it from your sales team. Once you have, it works out like this:

Divide the number of successful sales by the number of leads and multiply the outcome by 100. The result is your closing ratio expressed as a percent. If, for example, you had 50 sales leads and 10 closed sales, the ratio is 10 divided by 50 multiplied by 100, which equals 20 percent.

Understanding this metric allows you to quantify the performance of your marketing campaigns from a revenue generation perspective. Of course, you can remove the manual work and use marketing attribution to do this hard work for you.

Skip ahead to read how marketing attribution will tie your sales data to your marketing efforts.

 

Lifetime value

Lifetime value is an effective metric to measure to understand your digital marketing ROI from a holistic perspective. By measuring customer lifetime value (or CLTV) in relation to cost of customer acquisition (CAC), companies can measure how long it takes to recoup the investment required to earn a new customer.

CLTV is an ever-changing metric to understand how much revenue you can expect one customer to generate over the course of the relationship. The longer a customer is retained, the greater their value becomes. As such, managing churn needs to be a part of your sales and marketing process.

To calculate CLTV, you need to know your average purchase value, and then multiply that number by the average frequency rate to determine your customer value. Then, once you have your average customer lifespan, simply multiply that by your customer value.

Sounds complicated? Hubspot has a great page on how to measure each aspect.

CLTV for proving digital marketing ROI

 

Cost per acquisition

Your cost per acquisition tells you how much it costs on average to acquire a new customer. To calculate cost per acquisition, divide your total marketing costs by the number of sales generated. Understanding your CPA gives you better insight into your digital marketing ROI. If you’re spending more to acquire a customer than a customer actually brings in, then you need to reassess your marketing strategy and campaigns.

CPA formula for proving digital marketing ROI

 

Marketing attribution

Ok, so if you’re an eCommerce marketer, then attributing revenue to your marketing campaigns can be done directly within Google Analytics. But if you have any kind of offline conversion; for example, phone calls, form submissions which are passed to a sales team for nurturing, then chances are you’re not seeing the full picture.

This is where marketing attribution comes in.

 

Tools like Ruler Analytics allow you to attribute your sales revenue directly to your marketing channels, campaigns and keywords. Let’s explain how.

Once Ruler Analytics code is added to your site, it can do the following:

  • Track every anonymous visitor of your site, using their cookie data.
  • When that user converts (by phone, form submission or live chat), we can fire their marketing journey and data over to your CRM.
  • We’ll continue to track the user, until the point of sale. At that point, the revenue attributed to them will be fired back into your analytics software.

This means one of two things:

  • You can track the performance and digital marketing ROI of your channels, campaigns and keywords using our custom reports. Or we can fire the data back into Google Analytics or Facebook.
  • You can optimise your marketing based on your data as you’ll be able to see what channels, campaigns and keywords are resulting in the most revenue, not the most clicks or impressions.

And there you have it! The five main KPIs you need to track to understand your digital marketing ROI. But remember, marketing attribution tools like ours can do all the hard work for you!

 

Book a demo now, or find out more about closed-loop marketing attribution by downloading our eBook.

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Written by

Digital Marketing Manager at Ruler Analytics with experience in SEO, content marketing and social. After working both in-house for a travel firm and at an agency, I help people (who used to be me) attribute their revenue to their marketing efforts.