06 Sep What does your return on investment (ROI) look like in online marketing?
What does your return on investment (ROI) look like in online marketing?
It can be difficult, confusing and overwhelming trying to determine your online marketing ROI. Especially if it is your first time using Google Analytics. The sheer volume of data available can easily leave you staggered. And once you have gotten over the initial shock, you will need to sift through all that data and work out what it means.
But not to worry it is easier than it appears. Before trying to measure the ROI of your company’s digital marketing activities, you need to understand some basic metrics/benchmarks. Here are the most important key performance indicators and what they mean:
- Cost per Lead
The cost per lead that your website collects should not be more than what you make from closing that lead. A lead is a potential client that leaves any kind of contact information. To calculate the cost for every lead you have acquired, look at the total expenditure your business has spent on PPC (pay-per-click) and the amount of users who have been converted to lead. If you have run a PPC campaign for R3000 and 50 users have tried contacting you or left their contact details, your cost per lead would be R60. Before you even begin a campaign it is a good idea to find out what the average cost per lead is in your industry and then use this as a benchmark.
- Lead Close Rate
Track the leads you close online so that the data can be integrated into the analytics you’re gathering. Check your closing rate against leads being generated. This can also help you see if your targeting efforts are successful or not.
To calculate the lead-to-conversion rate, take the total number of sales and divide it by the number of leads, multiplied by 100. This would give you a conversion rate in %. The value of the conversion depends on what it is worth to you. If your product is valued at R1000 and a lead turns into a sale, that lead would be worth R1000. Yet, not every lead will end in a sale. This will affect the conversion rate. If after every 10 leads you sell 2 products, your conversion rate becomes 20%.
- Cost per Acquisition
Your total expenditure on a particular platform or campaign is divided by the total number of new clients/sales during this time, this gives your cost per acquisition. This number should reflect the amount you would be willing to pay for a sale. Your CPA should not be more than your gross profit.
- Conversion Rates
Conversion is a key component in any paid marketing campaign. The goal is to turn window-shoppers into buyers at a high rate. The conversation rates are looked at across entire accounts and not for individual landing pages. Conversion rates vary across industries and platforms but here are some helpful guidelines.
- Landing Page
You can measure bounce rates to see which pages are not contributing to conversions and either fix or remove them from your digital marketing strategy.
- Click-through Rates
Click-through rates can gage the success of an online campaign by calculating the amount of link clicks compared to the amount of visits to a particular page. Content can redirect traffic to your site which can increase new business at no additional marketing costs.
The average click-through rate on AdWords paid search is 2%. Anything over is considered an above average rate.
- Year-to-Year Comparison
You can see how your brand is improving over a longer period to see any abnormalities that wouldn’t necessarily stand out in a month-to-month analysis.
The success of your marketing campaign can be determined by traffic, leads, reach, search engines, social media and direct traffic. You may be required to change the KPI’s over time but from these initial factors you can adjust your strategy accordingly and set realistic goals. Collaboration between the sales and marketing team will indicate returns based on your spend on digital marketing and the sales increased.