Measuring your ROI (return on investment) ensures that your money is being spent the right way and to its full potential. It’s essential to measure your ROI when investing money in marketing – whether it’s a Google Ads campaign, an email campaign or a new landing page on your website.
With a wide range of options in digital marketing, you have the freedom to experiment with your ads and see what works best for your business. For example, your Google Ads may be performing well and have a higher ROI than social media ads, therefore this shows where you might be underperforming and allow you to either put more of your money and effort into Google ads or focus more on social media advertising and improve to a similar standard of your Google ad. This evaluation may also highlight any issues with your advertisement and give you the opportunity to fix them.
How can businesses calculate ROI?
There are many factors to consider when calculating your ROI in marketing, however, if you want to keep things simple, start with this formula:
Sales growth/ Marketing cost = ROI
This formula can help you to gain a basic understanding of how well your ad is performing, but you also need to consider other costs in your business to ensure your ROI is as accurate as possible.
How much growth is from organic traffic?
Organic traffic is the number of users coming to your website organically (not from paid advertisement). As your website grows, your organic traffic will too, therefore you need to consider if any of these organic users are becoming leads. If you have a high level of leads coming from organic traffic, then you may need to think about reducing your marketing budget or investing somewhere else.
Are there any other costs, such as employee wages (specifically the marketing team)?
This can be difficult to calculate, especially if you’re a small business and your marketing team may also double up as a different role in your business. A good way to consider this is the time spent on marketing and creating content. If you use an agency for social media or digital marketing, these fees will also need to come into consideration.
Beware of the challenges when measuring ROI.
It can be difficult to track your customers and leads, especially as consumers can be unpredictable and follow different patterns (for example, some may purchase straight away, while others take their time).
Unfortunately, it’s not always straightforward, some customers see your product/service and purchase straight away, while other customers might come back to your website from different devices and show up as different users (increasing your organic traffic), do their research and finally purchase. This means, a lot of the time, tracking can be near impossible. With this, it can be difficult to track leads too as you may be analysing the wrong time and your customer may finally purchase your product after your ad campaign has ended. While it’s important to consider these aspects, just remember that it’s not possible to get fully accurate data 100% of the time.