Also known as the rate of return, measuring ROI is essential to analyze the results of your digital marketing campaigns and align strategies with established objectives. And as incredible as it may seem, many companies do not usually calculate the ROI of their campaigns, especially digital marketing. This error is very common, as are those who forget to add up actions or perform incorrect analyses of their investments.
Learn more about what ROI is in digital marketing and how to calculate it in this article.
Index
How important is return on investment?
How is ROI calculated?
Choosing where to calculate ROI
What should I include in the calculation?
Be careful in your analysis
When ROI is zero or negative
How important is return on investment?
Those who sail aimlessly will get nowhere, as the saying goes. Therefore, measuring ROI means knowing exactly where you are going. As we already said in australia telegram phone number list the post about Measuring Results, you should always evaluate your business, so that you can evolve further down the road. ROI is another KPI to consider among so many other metrics, with the difference of presenting a tangible financial result.
Digital marketing, being flexible and measurable in all its tools, allows you to have the return on investment at your fingertips. If you have, for example, a conversion rate of leads that turn into sales, you can easily calculate the ROI for that specific channel.
How is ROI calculated?
Calculating ROI is pretty straightforward:
The investment gain, in this case, is the profit margin you have on each of your transactions. For example, if you sold R$ with a profit margin of 35%, the investment gain element in the calculation will be R$ . And if you had an Investment Cost of R$ in a digital marketing campaign, the complete formula would be:
In this example calculation, you made 250% profit, or 2.5 times the return on the amount invested.
That's why digital marketing is so interesting, it allows you to measure all actions. Or internal marketing , for example, allows you to integrate digital marketing software, such as RD Station , a common CRM software , where sales are integrated with dirigir generation .
This will let you know how much you are investing in digital marketing and exactly how many results it is generating for you. Then, simply apply the ROI calculation we mentioned above.
Choosing where to calculate ROI
There are several ways to calculate ROI. It all depends, first of all, on which area you are going to analyse. You can analyse the ROI of all digital marketing investment, for example, as well as other actions, such as offline campaigns, training, events, etc.
You will also be able to calculate the ROI of each area of digital marketing, such as email marketing campaigns, SEO strategies, Google Adwords campaigns and social networks.
Separating metrics allows you to know how much you spent on each of them and what return each provided. This is actually the advice we give. You should calculate the overall ROI of your digital marketing campaigns, but also of each of the channels.
This will allow you to know where to run in each situation.
What should I include in the calculation?
Calculating ROI in digital marketing should include everything from investments in paid media (Google Adwords, Facebook Ads, and others) to hiring third parties and employee work hours. If you are going to break down expenses for each channel, to know the specific ROI for each one, you should also break down the hours of work dedicated to each one.
That's why it's very important to have productivity and project management tools. Using a good CRM will also give you an idea of your sales team. Don't forget to include them in your investments as well.
When we talk about profits, it may seem easier to measure, but it is not. Here it will be very important to know which channel is converting into sales. Again, it will be very important to integrate marketing and sales , so that you can have an exact x-ray of your investments. The cost of the investment must be covered from start to finish, from attraction to conversion. All the steps between one and the other must be accounted for so that you know exactly how much you spend on acquiring a customer. And how much return this generates for you.
Be careful in your analysis
Calculating ROI, as we have seen, is very important for any business. Another very important point is to be careful with your analysis. Try to choose a time period so that you can compare the results. This will also allow you to understand the external factors that influence the result, such as seasonality and others that can influence the graphs up or down.
Some metrics, such as an increase in website visits or “likes” on your fan page, may not be that meaningful. A conversion rate that results in a sale is much more valuable than metrics that fill your eyes but not your pockets.
Being very careful will allow the manager to focus his investments, for example, on better qualifying his leads. A much better result can come from a lead that is already within his sales funnel . It would therefore be more interesting to invest in these leads than to attract more visitors to the top of the funnel.
When ROI is zero or negative
Just look at the importance of calculating ROI. If it comes out to zero or negative, you will need to evaluate whether your Customer Acquisition Cost (CAC) or even whether the average ticket for your products and services is adequate for your business. This type of analysis will even allow you to understand whether you are investing your money correctly even in your structure. You will be able to review your contribution margin. Your fixed and variable costs may be impacting your business, and not just the investment to attract customers.
Much more than evaluating the return on marketing investments, you may end up discovering that your profit margin is very tight. Therefore, your campaigns cost not only the amount invested, but also the return on investment.
