10 Metrics to Understand Your Campaign’s ROI

Complicated Investment

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Digital advertising services focused on revenue.

Focus on the things that matter. Driving revenue and having a return on investment that is scalable and sustainable is the baseline.

Digital marketing campaigns should be treated as investments. But with so many variables and places to attribute marketing results, it isnt as easy as you might think.

The best way to visualize your digital investment is by treating is like an investment. You pay close attention to interest, gains, losses, and dividends. In a digital advertising campaign, visualizing the performance is done by calculating the Return on Investment (ROI).

THE TOP 10 ADVERTISING ROI METRICS

We’re going to walk through the top ways to analyze ROI. Methods vary when it comes to campaign ROI calculation, so understanding these marketing ROI metrics is a smart place to start.

Well tell you about the benefits and limitations of each metric and how they can contribute to the calculation of ROI in marketing.

  1. Cost Per Lead (CPL)
  2. Cost Per Acquisition (CPA or CAC)
  3. Unique Monthly Visitors
  4. Average Order Value (AOV)
  5. Customer Lifetime Value (LTV)
  6. Lead-to-Close Ratio (LTCR)
  7. Branded Search Lift
  8. Non-Brand CTR
  9. Average Position
  10. Return-on-Ad-Spend (ROAS)

DIGITAL MARKETING ROI CAN BE HARD TO CALCULATE

Unless youre strictly an E-Commerce website, the calculation of ROI in digital marketing isvery challenging. This is especially the case with companies that specialize in services, B2B, and other industries where you’re not directly selling products online. Still, its important to understand how to measure marketing ROI.

With this challenge in mind, here are 10 metrics to measure your digital marketing ROI (and how to calculate them).

Most of these metrics are not direct inputs for calculating marketing digital ROI but should help you get a broad sense of whether or not your digital marketing investments are resulting in profitability.

1. COST PER LEAD (CPL)

This metric tells you,in a general sense, whether or not your digital marketing efforts are profitable. Cost per lead is usually associated with paid traffic since you dont technically pay for organic traffic.

HOW TO CALCULATE UNIQUE MONTHLY VISITORS

This is calculated directly in AdWords (and other advertising platforms) and is often also called cost-per-conversion

  • It is up to you to make sure that your conversions align with what you consider to be a lead. Overorundercountingcan result in skewed cost-per-conversion data if its not set up properly.

On the organic side, youarentpaying on a per lead basis. Instead, youre paying for SEO strategy and content marketing.

These efforts result in lead generation over time, but it can be difficult to tie back to a per lead cost.

2. COST PER ACQUISITION (CPA OR CAC)

This metric tells youwhat you are paying to acquire an actual customer not just a lead. Paid campaigns can view this in virtually real-time, and while this metric doesnt directly apply to SEO efforts, you will (ideally) be able to blend the two lead sources together to see your actual Customer Acquisition Cost across all of your digital efforts.

HOW TO CALCULATE CPA IN DIGITAL MARKETING

You dont need a CPA calculator to gather this simple metric. CPA/CAC is calculated by your total digital marketing spend divided by your number of acquired customers.

  • CPA/CAC = Total marketing spend / Number of acquired customers

3. UNIQUE MONTHLY VISITORS

This metric tells youhow many people are coming to your site on a monthly basis. It is very broad in the sense that without digging deeper, we dont know how valuable this traffic may or may not be.

HOW TO CALCULATE UNIQUE MONTHLY VISITORS

This is tracked directly in Google Analytics, so there is no need for calculations. To get more specific, we can segment the traffic by source (paid, organic, social, etc) and then look at value-based metrics on these segments (more on this later).

Generally speaking, to gather data for ROI, analytics is a smart way to get started.

4. AVERAGE ORDER VALUE (AOV)

This metric tells youhow valuable your paying customer is in each instance that they purchase. AOV is most useful for E-Commerce stores, but services and B2B can use the next metric instead.

For E-Commerce, we can multiply the AOV by the repeat rate to get an even more valuable metric, Customer Lifetime Value.

5. CUSTOMER LIFETIME VALUE (LTV)

This metric tells youwhat you can afford to pay in ad spend to acquire each customer profitably. LTV is important to know because it applies to every kind of business.

6. LEAD-TO-CLOSE RATIO (LTCR)

This metric tells youif your leads are of high quality, whether your sales are efficient, and also helps project your digital marketing ROI.

HOW TO CALCULATE LTCR IN DIGITAL MARKETING

Your Lead-To-Close Ratio is simply your total number of leads divided by how many leads have been closed.

  • LTCR = Total number of leads / total number of closed leads

PROJECTED ROI FORMULA

Lets look at how we can arrive at projected digital marketing ROI if we know our Lead-to-Close Ratio (LTCR), Cost of Goods Sold (COGS), and Cost Per Lead (CPL).(Some companies dont have a true COGS but can consider other variable costs here.)

Example: Let’s say youhave a lead-to-close ratio of 4, meaning that we close 25% of our leads.

  • our cost per lead is $10. LTV is $200 and your cost of goods sold over that lifetime is $80.
  • Well shorten the formula by assuming that your Customer Acquisition Cost (CAC) = LTCR*CPL.

In this example, this gives us a CAC of (4*$10) = $40.

  • From above,ROI = (Net Profit/Total Cost)*100
  • ProjectedROI = [(LTV-COGS-CAC)/(COGS+CAC)]*100
  • ProjectedROI = [($200-$80-$40)/($80+$40)]*100
  • =($80/$120)*100
  • =66.7%

If weve only managed to confuse you further about calculating digital marketing ROI,this post from Search Engine Journal might help clear things up or you can reach out to us to discuss your annual ROI in more detail.

7. BRANDED SEARCH LIFT

This metric tells youthe increase in brand awareness over time as a result of digital marketing efforts.

HOW TO CALCULATE BRANDED SEARCH LIFT

You can calculate your branded search lift by tracking the number of search queries that include your brand name per month. Over time, as you continue to track this, your branded search lift is simply how many additional monthly searches your brand receives.

In most cases, this isnt only the result of search marketing, but all of your digital advertising campaigns.

For more,read Googles study on how search ads lift brand awareness.

8. NON-BRAND CTR

This metric tells youhowwellyour SEO campaign is performing. For this purpose, you can track it in Google Search Console.

Non-brand CTRalso appliesto paid search ad campaigns, where Google and other advertisers reward high CTR ads with priority positioning. In this case, its tracked in AdWords and other publishing platforms.

This metric doesnt tie directly to leads, revenue, or ROI from internet marketing but in many cases, you will see a positive correlation between them.

9. AVERAGE POSITION

This metric tells youwhich ranking you receive by search engines for keywords, on average.

HOW TO CALCULATE YOUR AVERAGE POSITION

For organic, you can average position in Google Analytics, and in the publisher platform for paid.

  • An average position of1would mean that you show up as the top result for every single keyword.
  • If your average position is dropping closer to1over time, then your SEO and content marketing efforts are starting to havepositive results.

A lower average position will usually lead to higher click-through rates, which means more traffic. If your SEO strategy was targeting valuable search terms to rank for, then you will likely see increases in revenue as well.

10. RETURN ON AD SPEND (ROAS)

This metric tells youthe revenue (instead of profit) earned for your ad spend but doesnt factor in other costs such as the cost of goods sold. ROAS is a useful metric if you are able to tie revenue directly to digital marketing efforts. Return-on-ad-spend is useful to a degree, but you need to fully understand your profit margin to know what ROAS percentage you are profitable at.

HOW TO CALCULATE ROAS IN DIGITAL MARKETING

If we think of digital marketing ROI asROI = (Net Profit/Total Cost)*100,then Return-on-ad-spend isROAS = (Revenue/Total Ad Spend)*100.

    • For example, say you spend $100 on ads and get $300 in revenue as a result, but your product also costs $100 to make.
    • Your ROAS would be 300% [(300/100)*100] but your ROI would only be 50% [(100/200)*100].

READY TO ASSESS YOUR PERFORMANCE?

Our team can tell you more about what ROI means in digital marketing, how to measure ROI in digital marketing, and what you might be able to expect from the average marketing ROI in your industry.

Caboodle Media can analyze and explain which ROI metrics that are driving growth for your business so that you can Have Confidencein your digital marketing investments.

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