In terms of digital marketing, often brands solely put more focus on viral content and engagement. However, these variables are only small parts of a whole digital marketing strategy. As these variables can not represent an exact result of how time, spending, and efforts impact your brand profits, measuring the return of investment (ROI) is the only way to define whether you allocate your marketing budget effectively and resulting in the desired outcome.
Hence, to achieve consistent growth, businesses must leverage these channels and follow the proper steps to maintain optimal return on investment.
What is digital marketing ROI?
In digital marketing, Return on Investment (ROI) is known as the measure of profit or loss generated on your campaign efforts. A positive ROI essentially means that a campaign is making more money than what was spent — and vice versa for negative ROI.
As a rule of thumb, digital marketers should aim for an average ROI of 5:1 — that’s $5 gained for every $1 spent on a marketing campaign. On the other hand, ROI below 2:1 is considered non-profitable and indicates that your marketing strategy needs some work.
Calculating the ROI
Return on investment simply compares the profit that resulted from a digital marketing campaign to how much the campaign cost to create and deploy.
The basic ROI calculation is: ROI = (Net Profit/Total Cost)*100
To understand whether your ROI is considered to result in a good performance, knowing industry average results relevant to your business can be a benchmark.
The return on investment calculation, however, won’t mean much if you don’t have any objectives or goals, have inaccurate numbers and data in your calculations, measure the wrong key performance indicators (KPIs), or are uncertain about what you’re measuring.
Which metrics to asses?
One of the best ways to improve your digital marketing campaign is by knowing how your current campaign performs. ROI can deliver a more precise measurement of how the campaign progress from time to time. Unfortunately, many businesses don’t put ROI in mind. Read Why understand digital marketing ROI vital for entrepreneurs
Calculating the ROI in digital marketing is dependent on factors including audience, company size, business goals and objectives, and industry. ROI alone isn’t the best number to use to measure the success of your marketing efforts. Instead, it may be helpful if you analyzed your KPIs and how they fit into the overall picture of improving digital marketing ROI.
Indeed, there is a learning curve and takes time to fully understand the ROI, alternatively, you can accelerate your digital marketing strategy with art&tale experts.