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Calculating the Return of Investment for Digital Marketing

Whilst digital marketing has become an essential part of the modern business strategy, the way that we approach aspects of digital marketing is constantly changing and developing.

To keep up with the changes to Google’s algorithms and continue to compete with online businesses, it’s vital to constantly grow and develop your approach.

 

In this day and age, it’s no longer good enough to simply post a few times on social media or write a few blogs for your website. Digital marketing departments are constantly under pressure to measure their return on investment (ROI). But just how do you measure the success of a campaign?

 

Through likes and the number of visitors alone, it’s hard to explain the value of engagement. That’s why we believe this guide will help you calculate the ROI and take steps to improve it.

 

Make sure you have a plan

 

Before racing ahead with your many digital marketing campaigns, it is important to understand what you are aiming to achieve and have a plan to help you reach these goals. It’s a common mistake to adopt multiple campaigns on different platforms all at once before fully thinking it through.

 

If you don’t have a set target beforehand, it’s much more difficult to track and manage several campaigns and it will make calculating your ROI much more difficult. It isn’t always the case that more content is better and running multiple Facebook ads, tweeting like a mad man and posting daily blogs will not always make for the best results. 

 

What is ROI?

 

You will need to understand what you are actually measuring before you can calculate your ROI. Creating a good plan would mean you will know what your goals and aims are and what you’re hoping to achieve.

 

To measure these you will need to look at the Key Performance Indicators (KPIs) to see how well your campaign is performing. There are a few key KPIs that you should focus on when calculating how effective a campaign is.

 

These include:
 

  1. General – Traffic, leads, reach
  2. Channel based – Website, blog, social, search engines
  3. Source based – Organic search, referrals, PPC
  4. Campaign focused – Lead generation, click through rates, conversions

 

You won’t need to track all of these at once either. You’ll find it more beneficial to figure out which KPI’s are most relevant to your business and then track this progress. For instance, you may be more interested in conversion rates of your PPC campaign than monitoring web traffic.

 

How to calculate it

 

Based on the number of conversions you receive, there is a way to calculate your ROI by using the table below.

 

The first table shows the monthly search volume, estimated traffic and number of conversions for set number of key phrases that are being optimised.

Keyword  Monthley Search Vol. Estimated Traffic Converters
Digital Agency 1900 330 1
Digital Marketing 2400 450 1
Best Seo Company 110 22 0
SEO Services 2900 511 3
SEO Marketing 720 94 0
Website Ranking 720 46 0
Web Development 2400 448 2
Web Page Design 1000 224 1
Online Marketing 2400 456 0
Buisness Marketing 590 23 0

 

Using the data above you can now calculate your ROI using the following formula:

 

ROI = (Cost per average sale x number of conversions) – Monthly SEO spend

 

Assuming a monthly spend of £1,400 and that the average order value was £500, you would be looking at a ROI of £2, 795

 

Cost of Seo Converters  Avg. Order Value Revenue Generated ROI
£1400 P/M 8 P/M 500 P/Order £4000 £2600

 

In conclusion

 

No matter what you’re hoping to achieve, it’s always important to determine whether your campaign was successful or not by calculating your spend on digital marketing and matching it against the KPIs and the increase in sales.

 

Managing your Digital Marketing doesn’t have to be so confusing and by following this guide you can start to track your progress and optimise it for better results.

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