Amount spent on digital marketing campaigns should be treated as a legit investment. The performance of these campaigns decides the returns on the investments. In order to make the most out of your ad campaigns, it is highly recommended for you to keep a constant and regular check on the digital marketing ROI.
There are various metrics that you need to check deliberately on a regular basis. But there are a few metrics that play a vital role in ensuring the success of your ad campaigns. This article talks about all the crucial metrics that prove beneficial in calculating the marketing ROI.
Related: What is Digital Marketing? Complete Guide
Here are the eight metrics that you must calculate to measure your digital marketing ROI.
1- Cost Per Lead (CPL)
Cost Per Lead or CPL is a digital marketing ROI metric that determines the total cost incurred to attract individual leads through paid promotions. It can be measured on the paid campaigns only and not on organic search campaigns.
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Here is the formula to calculate Cost Per Lead.
Cost Per lead = Total Marketing Spend / Total New Leads
For instance, A company spends $20,000 on its marketing campaigns and manages to generate 2,000 leads, so the cost per lead will be $10.00.
Here is how the CPL is calculated.
CPL = $20,000 / 2,000
CPL = $10.00
Essential Things To Keep in Mind
In order to minimize the cost per lead, you need to focus on targeting your audience in your marketing campaigns. The more accurately targeted audience, the more the chances of attracting high quality leads at a considerable lower cost.
2- Cost Per Acquisition (CPA)
Cost per Acquisition or CPA is a digital marketing ROI metric that demonstrates the total amount spent on acquiring a new customer. The expenses incurred from acquiring a lead to convert that lead into a legit customer are termed as Cost Per Acquisition. It is calculated to measure the effectiveness of your marketing campaigns.
Here is the formula to calculate the Cost Per Acquisition.
Cost Per Acquisition = Total Marketing Spend / Total Number of Customers Acquired.
For instance, a company spends $10,000 on their marketing campaigns and manages to acquire 1,000 customers, then the cost per acquisition would be $10.00.
Here is how the Cost Per Acquisition is being calculated.
CPA = $10,000 / 1,000
CPA = $10.00
Important Things To Consider
Just like the cost per lead, the efficiency of cost per acquisition would also depend on the perfection of your audience targeting. But here, some additional costs also come into the picture that wasn’t there in calculating the cost per lead. The additional costs include all the indirect costs incurred in converting them into customers.
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3- Unique Monthly Visitors
The Unique Monthly Visitors are the people visiting your website in a given time span, usually a week or a month. This metric is useful for the investment & strategy teams measuring the brand’s reach, analyzing the competition, and calculating the impact of your marketing campaign.
There is no clear formula to calculate the Unique Monthly Visitors, but it is a piece of information that will be available on Google Analytics. Furthermore, you can segregate the unique monthly views on the basis of devices, geographies, and time frames.
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4- Average Order Value (AOV)
Average Order Value is a digital marketing ROI metric that measures the average amount spent every time a customer places an order either through the mobile application or a website. It is easily calculated by dividing the total revenue by the total number of orders received in a described time frame.
Here is the formula to calculate the Average Order Value.
Average Order Value = Total Revenue / Total Number of Orders Received.
For instance, a company earns annual revenue of $100.00 and gets 98 orders in the same year. So, the average order cost would be $1.02.
Here is how the Average Order Value is calculated.
AOV = $100 / 98
AOV = $1.02
Important Things To Consider
Average Order Value can be increased by employing some smart strategies like upselling, cross-selling, free shipping, volume discounts, coupons, return policies, and donations. One of the best ways to implement these strategies is to bifurcate your customers in identical groups based on their buyer’s persona and behaviour.
Related: Ecommerce Growth Strategies That Fire Up Sales
5- Return on Ad Spend (ROAS)
Return on Ad Spend is a digital marketing ROI metric to calculate the revenue earned on your ads spent without deducting the cost of goods sold (COGS). ROAS is one of the most useful metrics if you are employing your marketing budget on digital platforms.
Here is the formula to calculate Return on Ad Spend.
Return on Ad Spend = (Total Revenue / Total Ad Spend) * 100.
For instance, if a company earns $1000 as revenue after employing $500, the ROAS would be 200%.
Here is how you can calculate the Return on Ad Spend
ROAS = ($1000 / $500) * 100
ROAS = 200%
Important Things to Consider
The individual benefit and importance of ROAs are that it helps evaluate the performance of your ad campaigns. When combined together with customer lifetime value (CLV), it provides essential information related to future budget trends, drives direction to overall marketing, and helps in strategy formation.
Related: Campaign Groups in Google Ads Account
6- Customer Lifetime Value (CLV)
Customer Lifetime Value or CLV is referred to the total amount of money a customer is expected to spend in your offerings during their lifetime. This metric is vital because it will help you make some crucial decisions related to the amount to be invested in acquiring new customers as well as retaining the existing ones.
Here is the formula to calculate the Customer Lifetime Value (CLV).
Customer Lifetime Value = (Annual Revenue of a Customer * Customer Relationship in Years) – Customer Acquisition Cost.
For instance, a company generates $1000 each year per customer with average customer lifetime of 5 years. They have incurred a total of $1000 in acquiring each customer. So the customer lifetime value of that company would be $4000.
Here is how you calculate the Customer Lifetime Value.
CLV = ($1000*5) – $1000
CLV = $4000
Important Things To Consider
You can increase your customer loyalty in several ways like creating a loyalty program, improving customer relationship management, and targeting the most valuable customers. Leveraging the power of upsells and cross-sells can also work in your favour.
Related: Best Strategies To Retain Your Customers
7- Lead to Close Ratio (LTCR)
Lead to close ratio is a digital marketing ROI metric that depicts the amount of leads that actually gets converted. It is essential for you to note that attracting high-quality leads will pave a hassle-free road of conversions. A lot of leads will be converted into customers if you have mastered the art of targeting.
Related: How To Use Feature Marketing To Get More Customers
Here is the formula to calculate the Lead to Close Ratio.
Lead to Close Ratio = (Total Number of Closed Leads / Total Number of Sales Leads) * 100
For instance, if you have generated 100 sales leads and only 75 leads are converted into customers, your LTCR would be 75%.
Here is how you must calculate Lead to Cost Ratio.
LTCR = (75 / 100) * 100
LTCR = 75%
Important Things To Consider
Lead to Closing Ratio is usually calculated to monitor the performance of your sales team and ensure alignment of both the sales and marketing teams. A few ways in which you can improve your closing ratio include
- knowing your product,
- knowing your prospects,
- asking the right questions,
- leveraging the power of storytelling,
- introducing a referral system, and
- integrating the use of artificial intelligence.
8- Average Position
Average position is a metric that tells you the average ranking given by your search engine for your keywords. If your average position is lower than you can expect higher click-through rates and more increased quality traffic. It is the sum of the average position index divided by the total impressions. An average position of 1 means that you are ranking higher for each and every keyword you used in your content.
Related: How To Check Google Rankings (Best Methods)
Conclusion
All the digital marketing ROI metrics mentioned above should be monitored and controlled on a regular basis to attract the desired results. If you see any undesirable fluctuations in the analytics, you have the free hand to change your campaigns’ bits to work in a desired productive manner.
