Measuring ROI (return on investment) is a common practice that companies, investors, and marketers use to calculate their investments and how they have performed. The standard formula used to determine ROI for sales is to first subtract the initial value of the investment from the final value of the investment to determine the returns. Then, divide that number by the cost of investment, and multiply it by 100 to see how it measures up relative to the investment level. Typically, anything over one is considered a positive ROI.
Calculating marketing ROI—and, as part of that, ROAS (return on ad spend, which specifically measures profits based on how much is spent on the marketing platform itself)—can help measure the degree to which marketing efforts are contributing to the company’s profit and overall growth. This is also a great way to understand which elements of a campaign are working, what should be improved upon, and what should be scrapped.
However, instead of just measuring your ROI during your campaign, we think it’s important to understand what it is you’re measuring before you create your digital marketing campaign. This way, you can strategize your marketing efforts with these ROI goals in mind.
In this article, we’ll discuss how and why prioritizing ROI at all stages of your digital marketing campaign—from beginning to end, and beyond—can help your brand achieve its objectives. Scroll down to read more!
Establish Your Brand’s Goals Ahead of Time
The first question to ask is: what results are your brand looking for? Many companies think that sales are the only ROI that matters, but your business may be missing out on plenty of growth opportunities by thinking this way.
For instance, if your business is looking to improve brand awareness, consider tracking KPIs (key performance indicators) related to growth and user sentiment by creating content that encourage shares, downloads, or website traffic. If sales are your priority, then one would likely track clicks, sign-ups, and of course, conversions.
That being said, most marketing programs will realistically aim for some kind of combination of both brand awareness and conversions, and brand awareness can certainly feed into conversions. So in most cases, you may need to “zoom in” on a certain platform, campaign, or ad group, and measure separate KPIs depending on the goal of that specific platform, campaign, or ad group.
By clearly setting and understanding your growth objectives ahead of time, this will help you streamline your marketing efforts and focus on creating more strategically targeted ad content. It is also important to ensure you are closely tracking your digital marketing efforts based on these goals, as this data will provide valuable and tangible insights that can help you optimize your campaign accordingly. Doing so can also prevent unnecessary time and ad spend.
Here are some additional factors to consider when mapping out your ROI goals:
- Cost/ad spend – The projected budget or cost for creating and promoting the marketing campaign
- Number of leads – how many people converted to a lead
- Lead-to-customer rate – the percentage of leads who became a customer
- Average sales price – the average price of your product or service
For more examples, take a look at this case study to see how Spark Growth helped garner brand awareness for a non-profit organization, and this case study to see how we helped increase sales for an e-commerce brand.
Remember that Vanity Metrics Aren’t Everything
When running digital and social media marketing initiatives, it can be easy to view metrics such as likes, followers, and impressions as the most important ones. This is understandable given how front-facing these metrics are to both audiences and shareholders, the latter of which may be measuring the company’s success based on these factors. But our advice? Don’t get too caught up in these. After all, they’re called “vanity” metrics for a reason!
This is because they rarely correlate to other valuable performance metrics such as click-through rates, visitor-to-lead conversion rates, or products sold. And while metrics like follower count, engagements, and post likes are valuable when understanding audience reach, user sentiment, and brand awareness, measuring a campaign’s success solely on these can be limiting and may ultimately ignore long-term brand objectives.
Here’s an example: analyzing the customer purchase journey often takes a longer time to study, but may still be more relevant than counting the number of post engagements. This is because understanding the customer’s buying journey can allow your brand to evaluate and improve its customer experience, which is an ongoing priority for many businesses, whereas the total number of engagements offers a much narrower glimpse of the larger picture. These kinds of metrics can sometimes distract a marketer from what’s most important.
Additionally, with other content marketing strategies such as blog posts or organic social media, it may be harder to measure whether those are leading to conversions, especially if they are not directly linked to a landing page. However, this doesn’t mean that those efforts are not still contributing to the company’s success in other ways! For instance, they could be building credibility for a customer on the brink of making a purchase, or improving the website’s search ranking, which are both highly valuable but nearly intangible to measure on a per-post basis.
It’s a Strategic Approach that Yields Tangible Results
ROI-driven marketing is a strategically driven method that will allow your brand to streamline its efforts, exercise more control over its digital marketing campaigns, and more effectively achieve the results you are looking for. Additionally, one of the big benefits of digital over physical marketing when it comes to measuring ROI is that digital allows businesses to track data in real time. Brands can then make ongoing decisions based on these analytics by gauging what returns they’ll be getting, determining what to invest in, and more.
As noted earlier, however, it is important to remember that while calculating sales ROI is relatively straightforward, the calculation is not as intuitive when factoring in other valuable metrics. Our solution? Calculate the estimated value. For example, if you know that every 100 clicks on average results in a sale, then a click could have the value of approximately 1/100th of a sale.
At the end of the day, it’s important to remember that there’s much more to ROI than just follower growth or new sales. Using ROI-driven marketing when planning your campaigns from start to finish can be incredibly effective, and can even help to shape future campaigns and initiatives!
At Spark Growth, our data-driven approach to social media marketing utilizes ongoing analytics and optimizations to help businesses drive real returns on their investments. If you’re not sure how to get started with your digital marketing campaign, we can help. Book a 30-minute conversation with us by clicking the link below!
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