How To Measure Your Digital Marketing ROI: Five Steps
Krista Neher is the CEO of Bootcamp Digital, author of 6 best sellers, international speaker, and recognized thought leader in digital marketing.
I talk to thousands of companies every year. I collaborate with big brands and small companies in the world. Everyone is struggling with the same problem: measuring the impact of your digital marketing. Although digital marketing now accounts for more than 50% of marketing budgets, most companies still question the return on investment.
Digital is the most measurable marketing channel we have. There are many data points to measure any digital marketing performance. However, companies continue to struggle because they do not have a measurement plan.
Let's go through these five steps.
1. Define your strategy.
You can't measure your marketing efforts if you don't know what you're trying to accomplish. For example, metrics that measure brand awareness are different from metrics that measure conversions or sales. Start by clearly defining your strategy and goals.
Your strategy is typically defined by the level of the marketing funnel you want to influence. The stages of the marketing pipeline are awareness, interest, desire, action, retention, and promotion. Consider your specific marketing goals and go from there.
2. Determine your KPIs.
KPIs, or Key Performance Indicators, are the main metrics you use to determine if your marketing is working. This is because we cannot accurately measure the sales or bottom line we want. For example, a restaurant may want to attract new customers. There is no real way to measure how many new customers you will bring in, especially through Facebook ads, Google search results, or email campaigns. Even companies that sell products online don't know exactly if their marketing activities have led to a specific sale. In many cases, it is a combination of activities that leads to sales. For example, someone saw a search ad, followed a brand on Facebook, and received an email; most companies don't know exactly how much each channel contributed to the final sale.
This is why companies use KPIs. KPIs allow us to measure the impact of a channel. Each marketing channel should have one to three KPIs, all of which should reflect the strategy. For example, a business using Facebook for awareness might use reach as a KPI, and a business focused on promoting blog content might use clicks or website traffic.
When choosing KPIs for your business, consider those that demonstrate quantity, quality, and cost. For example, if your strategy is to generate website traffic, your quantitative KPI would be clicks, your qualitative KPI could be time spent on your website, and your cost could be your cost per click.
3. Set parameters.
Stakes are the targets of your KPIs. For example, your KPI could be an email marketing open rate, and your benchmark would determine what a "good" open rate is. Basically, the benchmark determines how good your results are.
Establishing metrics can be a challenge for companies. There are three areas that need to be evaluated to determine your KPI criteria. The first is to look at the industry average. For example, look at average email open rates. While your business may be different, the industry average will give you an idea.
So consider historical performance. Provides context on how your organization has performed in the past. Finally, check your dedicated resources for additional results. For example, if you double down on your email marketing resources, you can expect a 10% increase in your open rate. On the other hand, if you don't allocate more resources, your rate may stay the same as what you saved last year.
After reviewing all three areas, determine your marketing channel criteria.
4. Determine the return on investment.
ROI can tell you if your digital marketing is profitable. To determine ROI, you need to assess what you're putting into your marketing performance and what you need to earn to maintain profitability.
Evaluate investments in your digital marketing channels. Make sure you put in the time and effort, not just the direct costs.
Next, determine what you need to earn in terms of income to recover your investment. For example, if you spend $100 on email marketing, you must earn at least $100 on email marketing to get paid. If your profit margin is 50%, you should be earning between $100 and $200 for every $100 you spend on email marketing. By knowing these ROI metrics, you can evaluate your email marketing KPIs to make sure your emails are profitable.
5. Create a measurement program.
Once you have established your KPIs, Benchmarks and ROI, the next step is to create a measurement program where you will periodically report and analyze your results. Most companies review their metrics monthly. Create reports or dashboards and schedule recurring periods to review your results and evaluate your performance.
Regularly measuring your digital marketing is critical to making smart decisions that increase results over time. These five steps will help you measure what's important and help you stay on track to define what success looks like.
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