How To Measure Your ROI In Digital Marketing

Track metrics to see how your investment in digital marketing services is paying off and where there’s room for improvement.

Digital marketing is a crucial part of your business—without it, your business would be less visible, attract fewer customers, and, ultimately, make fewer sales. But digital marketing shouldn’t be something you invest in and leave alone. 

Whether you manage digital marketing in-house or through an agency, it’s important to track key performance indicators (KPIs) so you can see how your investment performs over time and identify vulnerabilities before they have the chance to snowball into larger challenges.

If you’re a small-business leader focused on growing your customer base and increasing revenue, you may already invest in digital marketing services or are looking to invest soon. Either way, you likely want to know how this investment will pay off in the short term and long term, and it’s never too early (or late) to start thinking about metrics.

What is ROI in digital marketing, and why measure it?

A return on investment (ROI) in digital marketing refers to what you’re gaining compared to what you spent. Generally speaking, a high ROI means earning more profit as a direct result of the investment than the investment itself actually cost.

Your ROI in digital marketing will depend on what motivated you to invest in the first place. Perhaps you wanted to strengthen your business’s social media presence, increase website traffic, boost brand visibility, or attract a new customer demographic.

Regardless of your specific digital marketing goal, a high ROI will usually mean more profit for the business in the long term. But this can take time. 

There are many other factors you should consider in the short term. By measuring certain KPIs over time, you can gain a better understanding of how your investment is paying off, visualize trends that reveal success or cause for concern, and plan stronger campaigns in the future based on the data you have collected.

Types of digital marketing metrics and how to measure them 

There are three types of responses consumers may have to your business’s marketing strategy: action, engagement, and perception.^[1]

Action-based responses include buying something from your business, which has a direct, financial impact on your business. But these typically come only after building engagement- and perception-based responses, such as brand trust, awareness, interactions on social media, and general interest in your business’s products and services.

By combining insights from certain metrics, you can gain varying degrees of insight into all three of these types of consumer responses. But how do you choose which metrics to track?

There are an infinite number of metrics you could be tracking, but it’s not necessary to track all of them. Not every metric will be relevant to your specific digital marketing strategy or growth goals. 

For example, if you invested in digital marketing services to build your brand’s social media presence, you’ll want to track different metrics than someone who invested in digital marketing services for search engine optimization (SEO) or email marketing. 

Collecting and attempting to analyze all metrics at once could result in a data overload. Remember, information is only as great as your ability to make sense of it. Instead, consider choosing the ones you think would be the most relevant to your digital marketing strategy.

6 common sales metrics to measure digital marketing ROI (and how to improve them)

Here are six of the most common metrics your business can use to measure the ROI on your digital marketing investment.

1. Cost Per Lead 

Cost Per Lead is a common pricing model, in which you pay for each lead (e.g., potential customer that clicks through to your website) that your advertisements generate. 

When tracking this metric, you keep tabs on how much your business is spending to attract individual potential customers.

2. Lead Close Rate 

The Lead Close Rate calculates the number of leads that turn into actual sales.

If your business subscribes to the Cost Per Lead pricing model, the Lead Close Rate can reveal the effectiveness of your marketing strategy and help you identify weak spots before they become larger problems. For example, if your company makes more in sales than it spends on leads, then this would indicate the extent to which your marketing efforts are succeeding.

However, if your company spends more on leads than it makes in sales, that means your company is likely wasting money on an ineffective marketing strategy: Customers are interested enough to click to your website, but they’re not actually buying anything. In this case, you would need to change your marketing approach for the current campaign. 

Keeping track of what works and what doesn’t will also position you to better plan marketing strategies in the future: Some approaches just may not resonate with your target audience. This kind of data can help you avoid making the same mistake twice.

Tracking the Lead Close Rate over time can also give your marketing and sales teams a baseline from which they can use to measure the effectiveness of future marketing campaigns.

For example, let’s say one of your company’s marketing campaigns had a really high Lead Close Rate, but then a newer one has a much lower Lead Close Rate. Of course, there could be any number of things both within and outside of your business’s control that could be influencing consumer decisions, but this would signal to your team a discrepancy that is worth looking into.

3. Cost Per Acquisition

While Cost Per Lead tells you how much your business is spending just to generate a single lead, Cost Per Acquisition tells you the total cost of generating a single sale. To do this, divide your marketing costs by the number of sales. 

One way you can use this metric is to calculate the Cost Per Acquisition ratio between Customer Lifetime Value and Customer Acquisition Cost. The ideal ratio is 3:1, which means that you earn three times the amount you spend over the course of the customer’s lifetime than you spend trying to acquire the customer to begin with. A ratio of 1:1 would mean that you’re breaking even.^[2]

Once you know how much it costs to get a sale, you’ll have a better understanding of your ROI and how it pays off over time.

4. Average Order Value 

As a business leader, you obviously want to see the number of orders increase. However, what is just as important as the quantity of orders is how much they are worth. How much are your existing customers spending when they buy products or services from your business? This amount is the Average Order Value, and it can tell you a lot about the buying potential and needs of your customers. 

Would your customers buy more if they could see items that were bought frequently with the items in their shopping cart? Would they buy more if your website was organized differently?

Average Order Value can help you track revenue and manage growth. You can try to increase the Average Order Value by offering consumers upselling opportunities, a personalized shopping experience, or a better website user experience.

5. Conversion Rates By Channel

A conversion rate, in general, refers to the percentage of people who perform a specific, desired action. Your digital marketing strategy is likely spread over different channels, all working together in tandem to achieve a common goal. Depending on each channel’s specific goals, these goals could range from action-based responses, such as buying something from your business or subscribing to newsletters, or engagement-based responses such as watching a branded video all the way through.

By tracking Conversion Rates By Channel, you gain insight into how customers are responding to your brand in different digital contexts and from which of these channels consumers are clicking through to buy something from your business. 

This will help you create more targeted marketing campaigns and see which channels are most cost-effective. This can also help you determine where to direct your marketing efforts for future campaigns.

6. Return on Ad Spend

Return on Ad Spend measures how much your business makes as a result of advertisements compared to how much it spends on the advertisements. This will not only help you determine the return on a specific advertising campaign, but also help you plan more effective ones in the future. 

Tracking this metric over time through different types of ad campaigns can help you determine the types of ads that are most likely to lead to sales and the channels that are most likely to attract paying customers.

Work with your digital marketing agency to measure ROI 

Measuring the ROI of digital marketing can be a daunting task, but it can be made more manageable and productive by taking a strategic and deliberate approach to the measuring process. Luckily, working with a digital marketing agency or using a digital marketing dashboard can help you collect, manage, and analyze the most important data. 

If you’ve invested in digital marketing services, be sure to work with your provider to determine which metrics are most important to your business and which ones you’d like to see most often. Tracking metrics will help you track your digital marketing ROI now and in the future.