How to Measure Your Digital Marketing Campaign ROI

It is a common myth among marketers and business owners that investing in digital marketing is enough for business success. Well, your investment in digital marketing is just one part. In order to ensure your investment is delivering relevant returns, monitoring, measuring, and constantly tweaking the campaigns is equally important.  So how do you calculate your digital marketing campaign ROI?

And it makes sense; why would you invest in costly marketing when it doesn’t generate the sales you aim for?

Besides, calculating good ROI can give you insights into what is working, what isn’t and what needs to be tweaked. Equipped with such data, you can empower your upcoming strategies and ensure every dollar invested is used for your firm’s benefit. 

In this post, we will guide you through digital marketing campaign ROI and give tips on how to calculate it. And fear not; you will also know how to improve this ROI over time!

In this article

Define objectives and KPIs

When it comes to digital marketing, success is directly linked to planning and clear objectives. Let’s learn how defining objectives and selecting the right KPIs can help lay the groundwork for measuring the marketing ROI below –

a. Identify specific goals of the campaign

For success with your marketing ventures, it is crucial to establish solid objectives. And ensure that these objectives are –

• specific,
• measurable,
• achievable,
• relevant
• and time-bound.

In short, they are SMART!

No matter what your business aim is, whether you wish to enhance brand awareness, drive traffic or increase sales, defining clear goals provides focus and direction. 

• Clarity is key – Always ensure that your objectives are crystal clear. If possible, leave no room for ambiguity. This is because ambiguous goals can cause confusion. They can even hinder the ROI measurement.
• SMART approach – To effectively frame objectives, use the SMART criteria. This is because the SMART approach helps set realistic goals. Such goals are conducive to measurement. 
• Alignment with overall marketing strategy – Also, align your campaign goals with broader business objectives and marketing strategies. Why? Well, this synergy ensures coherence. It also maximises the digital initiative impact. 

b. Determine KPI aligned with objectives 

Once you have established the objectives, focus on identifying the metrics so you can measure progress and success. KPIs serve as quantifiable markers of effectiveness and performance. 

• Relevance is paramount – Select KPIs that directly align with campaign objectives. Why? Well, anything Irrelevant can skew perceptions of success. It can also impede accurate ROI assessment.
• Variety matters – Incorporate a diverse range of KPIs to capture different facets of performance. This is because some KPIs may focus on engagement metrics like click-through rates and conversion rates. Similarly, others may track financial metrics. These may include return on ad spend (ROAS) and customer acquisition cost (CAC).
• Quality over quantity – When selecting KPIs, always prioritise quality and not quantity. This is because meaningful insights are more valuable than a plethora of superficial indicators.

Track conversions

Tracking conversions is essential. It helps evaluate the campaign’s efficacy and assess its ROI. Let’s learn the intricacies of conversion tracking below –

a. Set up conversion tracking tools (e.g., Google Analytics)

Are you keen on obtaining granular insights into user behaviour? Ensure the implementation of conversion tracking tools like Google Analytics.

The information gathered through such tools gives insights into how users interact with your site. Also, with proper configuration of these tools, you unlock the ability to track key metrics like –

• Traffic sources
• User engagement
• And conversion rates 

These data serve as the cornerstone for refining content marketing strategies. They also help optimise the website performance for boosted user experience and conversion rates.

b. Define what constitutes a conversion (e.g., purchase, sign-up, download)

Defining conversion goals is not merely about identifying user actions; it is about aligning those actions with your overarching business objectives.

For instance, a completed purchase, a newsletter sign-up, or a resource download, each conversion signifies progress towards your desired outcome. Also, these metrics provide actionable insights into the marketing campaign’s effectiveness and the user journey.

This deeper understanding empowers you to make –

• data-driven decisions,
• fine-tune your strategies,
• and ultimately drive greater success for your business.

Calculate the Cost of the Campaign

It is imperative to comprehensively assess the campaign’s financial implications. Ensure that both direct and indirect expenses are included.

a. Sum up all expenses associated with the campaign

Start by properly documenting all costs that are directly tied to your campaign. This includes expenditures like –

• advertising spend on various platforms,
• fees incurred for hiring external agencies or consultants,
• any costs related to content creation, design, or software tools utilised during the campaign’s execution 

When you effectively track these expenses, you gain a holistic view of your marketing investment. You become capable of accurately evaluating the campaign’s ROI.

b. Consider both direct and indirect costs

Besides the direct expenses, also factor in the indirect costs that may have an impact on the campaign’s overall budget. These could include,

• expenses associated with internal resources allocated to the campaign, such as employee salaries, office space, and utilities.
• ancillary costs such as travel expenses, printing materials, or any unforeseen miscellaneous expenses that might arise during the campaign’s implementation.

When you account for both direct and indirect marketing costs, you gain a comprehensive understanding of your marketing effort’s financial implications. You also become able to make informed decisions and plan for future campaigns.

Measure Revenue Generated

The effectiveness of the campaign can be measured when the revenue it generates is gauged effectively. And the same can be attributed back to fortifying certain marketing efforts. 

a. Track sales or revenue directly attributed to the campaign

If you are keen on monitoring sales or revenue directly linked to your campaign, implement a tracking mechanism. This means you must track things that are directly attributed to the campaign’s marketing channels. These include customer interactions like,

• purchases
• inquires
• conversions

These metrics, on analysis, can give insight into the campaign’s impact on driving revenue. They can also help assess the campaign’s overall effectiveness in generating tangible ROI

b. Utilise tracking codes and attribution models to attribute revenue accurately

Now is the time to deploy tracking codes and employ sophisticated attribution models. They will assist in precisely attributing revenue to the respective marketing touchpoints and channels within your campaign. 

If possible, use multi-touch attribution or last-click attribution. This is because they allow us to understand the customer journey comprehensively and identify the specific marketing efforts that contributed most significantly to revenue generation.

Using these tools and methodologies, you can gain a deeper understanding of the campaign’s ROI. You will be able to optimise future marketing strategies for maximum revenue growth.

Calculate ROI

There are two things that you get by assessing the return on investment (ROI) of your campaign –

• critical insights into its profitability
• effectiveness in generating revenue.

Let’s determine how to do the same below –

a. Use the formula: ROI = (Revenue – Cost) / Cost * 100

Calculate ROI by applying the formula: ROI = (Revenue – Cost) / Cost * 100.

For example, if your campaign generated $10,000 in revenue with total expenses amounting to $5,000, the calculation would be ($10,000 – $5,000) / $5,000 * 100 = 100%.

This shows that for every dollar invested in the campaign, you earned an additional dollar in revenue. This means the outcome is a 100% ROI in digital marketing.

b. Consider lifetime value (LTV) of customers for long-term campaigns

When it comes to long-term campaigns, factor in the LTV of customers. This way, you can obtain an accurate assessment of ROI. LTV also represents the total revenue a customer might generate throughout his time with your firm.

Combining LTV with ROI calculations, you can account for the ongoing revenue net profit stream derived from acquired customers. And this goes beyond the initial campaign period.

For instance, if a customer acquired through your campaign has an estimated LTV of $1,000, the basic ROI calculation would adjust to reflect the long-term value generated by the campaign’s initial investment amount.

Analyse Customer Acquisition Cost (CAC)

Next, understand the CAC. It will help assess the efficiency and sustainability of your marketing efforts. Here is how to do the same –

a. Determine CAC by dividing total campaign costs by the number of new customers acquired

Divide the total campaign cost per lead up by the new customers acquired.

For instance, if your campaign’s full cost per acquisition, of $5,000 resulted in acquiring 100 new customers, the calculation should be – CAC = $5,000 / 100 = $50 per customer.

This figure will give you insights into the cost-effectiveness of your marketing initiatives. It will help identify areas for optimisation and efficiency.

b. Compare CAC to customer lifetime value (LTV) for profitability assessment

When it comes to measuring the profitability of acquiring new customers, compare the CAC to the customer lifetime value (LTV). 

LTV is the total value a customer is expected to generate throughout his relationship with your firm. Ideally, LTV must exceed the CAC to ensure positive ROI. 

For instance, if the CAC is $50 per customer and the LTV is estimated at $1000, it indicates a healthy ratio. It also suggests that the campaign is generating significant long-term value for your business. This comparison helps in making informed decisions. You are able to allocate resources properly and even scale customer acquisition. 

Assess Attribution Models

Let’s learn how different attribution models assign credit to marketing touchpoints in the below section –

a. Evaluate various attribution models (e.g., first-click, last-click, multi-touch)

Use common attribution models, such as – 

• first-click – This attribution attributes the entire conversation to the first touchpoint encountered by the customers. 
• last-click – This attribution assigns all credit to the final touchpoint before conversion
• multi-touch attribution – This attribution distributes credit across multiple touchpoints along the customer journey. It provides a more nuanced understanding of each interaction’s contribution.

All these models help gain insights into the customer journey. You become capable of tailoring your attribution approach to suit your specific business goals and marketing objectives, too.

b. Choose the model that best reflects your customer journey

Now, focus on selecting an attribution model that best reflects the complexity and dynamics of your customer journey.

Consider factors including,

• the length of the sales cycle,
• the number of touchpoints involved, 
• and the typical behaviour patterns of your target audience.

For instance, if your customer engages at multiple channels before purchasing, with a multi-touch attribution model, you can gain a more accurate depiction of the customer journey. This information is far more in-depth compared to first-click and last-click models.

Monitor Other Metrics

Other than primary metrics, you must track secondary metrics, too. This is especially important if you wish to obtain deeper insights. Here is how you can do that –

a. Track secondary metrics (e.g., click-through rate, engagement rate)

Monitor secondary metrics, such as –

• click-through rate (CTR),
• engagement rate,
• bounce rate,
• and time on page 

For instance, the click-through rate gauges the percentage of users who click on a specific link or CTA. Engagement rate, on the other hand, reflects the level of interaction.

Similarly, the bounce rate reflects people who have left your site promptly after visiting. And lastly, time on page is how much time your users spend on your site.

All these digital marketing metrics will give you a comprehensive understanding of your targeting and messaging. They will help –

• identify trends,
• assess campaign effectiveness,
• and optimise your strategies for maximum impact

b. Analyse how these metrics contribute to overall ROI

Now, examine how changes in secondary metrics correlate with shifts in overall ROI. This way, you can assess their impact on campaign performance.

For instance, an increase in click-through rate may lead to higher website traffic. It may also result in increased conversion rates.

The notion behind analysing the relationship between secondary metrics and ROI is –

• identify areas for improvement,
• refine your tactics,
• and enhance the overall effectiveness of your marketing efforts.

Adjust and Optimise

If your notion is to maximise the effectiveness and efficiency of your campaigns, focus on adjusting and optimising it regularly. Here are some tips to do the same –

a. Continuously monitor campaign performance

It is crucial that you monitor the performance of your marketing campaigns across touchpoints and channels. Use analytics tools to market KPS, such as –

• conversion rates,
• click-through rates,
• and return on investment (ROI) 

With regular monitoring, you can identify trends such as –

• identify trends,
• detect potential issues,
• and seize opportunities for improvement in real-time 

Staying proactive is crucial here. It is your key to mitigate risks and capitalise on emerging opportunities for success.

b. Use data insights to make informed optimisations and adjustments

Next, use data insights to inform strategic optimisations and adjustments. To do so, analyse the data collected from the monitoring efforts. It will help identify areas of inefficiency and underperformance.

You can use A/B testing to experiment with different messaging, visuals, or targeting strategies. This is the best way to determine which variations yield the best results.

Also, audience segmentation can come in handy in tailoring the marketing efforts to specific demographics or buyer persona. This process, in turn, can result in increased relevance and effectiveness. 

Ensure that you maintain continuity in this process. Only then can you –

• optimise campaign performance, 
• enhance audience engagement, 
• and drive better business outcomes.

Consider Long-term Impact

When it comes to calculating the long-term impact, don’t limit it to immediate results. You must assess its influence on customer loyalty and brand perception over time, too. Here is what we mean –

a. Assess the long-term impact of the campaign on the brand awareness and customer loyalty

Start by monitoring indicators such as –

• brand mentions,
• sentiment analysis,
• and customer feedback

All these will help gauge the campaign’s resonance with your target audience. Also, track metrics related to –

• customer retention, 
• repeat purchases, 
• and referral rates to assess its impact on long-term customer loyalty.

All these factors will come in handy in determining your campaign’s success in strengthening brand affinity. They will assist in nurturing a lasting relationship with the audience.

b. Factor in indirect benefits that may not be immediately measurable

It is crucial to consider the indirect benefits of your campaigns, too. These could include –

• improvements in brand perception,
• increased social media engagement, 
• or enhanced credibility within your industry 

We agree that these benefits may not have a direct impact on short-term ROI. But they may contribute to building a strong foundation for future growth and success.

Besides, acknowledging these indirect benefits will help you obtain a holistic understanding of your campaign’s success. It will help you make informed decisions.

Communicate Results

For transparency, you must communicate the results of your campaign. These results will also account for alignment and accountability across team members and stakeholders.

a. Prepare comprehensive reports detailing the campaign performance and ROI

Start by compiling comprehensive reports. Including,

• key metrics,
• ROI analysis,
• and actionable recommendations.

Ensure that these reports provide detailed insights into the key performance indicators of your campaign, including –

• audience engagement,
• conversion rates,
• and cost-effectiveness 

If possible, use visualisation charts to present the data more clearly. The idea here is to empower stakeholders to make informed decisions. Also, ensure that you are capable of making informed decisions.

b. Present findings to stakeholders and team members

Lastly, schedule presentations or meetings. The notion is to present the findings of your campaign reports to stakeholders and team members.

Here are things you can do –

• Clearly articulate the objectives of the campaign and the strategies employed. You can also focus on the outcomes achieved. 
• Then, highlight key successes and areas for improvement. Adding lessons learned throughout the campaign process can further fortify the presentation.
• Lastly, encourage open dialogue and feedback. This way, you can foster collaboration and alignment across departments.

Wrapping it up

Well, one thing was clear from this blog: continuously monitoring digital marketing ROI is crucial for running a successful firm. Without it, you are just wasting money on strategies that aren’t resonating with your audience. Or it means your campaigns are launched on the wrong channels. 

So, be wise and use the tips listed above to streamline your process of measuring digital marketing campaigns’ ROI. Be vigilant, focused and on-trend to reap benefits beyond imagination. 

Also, if you need expert help in the process, scan Sortlist’s archives. You are bound to come across experts in digital marketing campaign ROI capable of assisting you holistically.