How to Measure ROI on Marketing Spend

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How to Measure ROI on Marketing Spend
Christine Lee
Christine Lee
February 2, 2020
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Marketing

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Digital marketing opened up a whole new world to small businesses that previously relied on foot traffic or direct marketing mailers. Display ads and PPC evened the playing field between the little guy and the big guy, but as online advertising and social media marketing have ramped up in the past few years, it's become clear that marketing costs can tank your budget if you are not measuring ROI. So when thinking about how to measure ROI on marketing spend, businesses should focus first on those goals that matter most.

When it comes to marketing investment, goals are typically defined by the results desired, but you can get more specific in terms of revenue benchmarks. Here are some common goal statements that you can use to measure your marketing ROI:

  • I want to boost online sales and see more revenue.
  • I want more followers and engagement on social media. I know how to sell to my audience from there.
  • I want to increase traffic to my landing pages to get more sign-ups.
  • I need constant lead generation for my sales team or email marketing.

From here, you can start measuring your ROI by looking at the metrics attached to these goals. This guide below shows you what to look for and how to set up your analytics to make it easier to see when your marketing dollars are working for you.

Boosting Online Sales and Revenue = Measure Your Conversions

Boosting Online Sales and Revenue = Measure Your Conversions

When it comes to making money online, it's important to track campaign performance and measure success by conversions. This is when someone spots your campaign and purchases something from your landing page. These metrics include:

  • Total conversions
  • Conversion cost
  • ROAS = Return on Advertising Spend
  • Revenue per click
  • Cost per click

You likely have social media campaigns, Google ads, display ads, and possibly other private ad networks. When you add up the spend on these campaigns and look at your monthly revenue, are you making a profit?

In addition, your agency or marketing manager should be able to provide you with a report that shows how much money each campaign made by looking at ROAS. This is calculated by looking at the revenue that every advertising dollar generated. If you have a 10:1 ROAS, for example, your campaigns are generating $10 for every $1 marketing dollar that you spend.

To set up conversion tracking, you need to use cookie tools such as a Facebook Pixel, Google conversion tracking, Google Analytics, Merkle, or a URL tracking service such as Bit.ly.

More Followers and Engagement = Look at Your Social Metrics

More Followers and Engagement = Look at Your Social Metrics

The truth is you do not have to spend anything to get followers and engagement if you believe in content marketing. By producing content every day and seeking out engagement with potential followers, you can slowly (or quickly if you do it right) build a following. However, many businesses forgo this organic route and use paid advertising to get more reach and exposure.

There's nothing wrong with paying for followers and engagement, but it should always be tied to a revenue goal if you plan on spending. There aren't too many small or medium-sized businesses that can spend thousands of dollars on engagement that is not tied to some revenue goal.

With that in mind, when you do commit marketing dollars to social engagement, you should track the following:

  • Audience growth rate
  • Post reach
  • Post shares, likes, and comments
  • Average engagement rate
  • Social sentiment rating
  • Amplification rate (the ratio of shares per post to the number of total followers)

You can look at Audience Insights on Facebook to get started, but every social platform has an analytics section. If you want to pay to track these social metrics and see brand mentions in real-time for organic engagement, we suggest using a tool like SocialReport.com. You can set up all of these metrics in a dashboard and see how well your campaigns are doing by bringing in new followers, shares, and likes.

Marketing strategies with engagement should include revenue-generating links or at least lead generation if you are looking for a faster payback. If you do not have a landing page with a sign-up linked to your social profile or if you are not tagging products in your social posts, you are missing out on revenue with these campaigns, which means your ads may not provide much ROI.

Increasing Web Traffic to Landing Pages - Tracking Clicks, CTR, and Abandons

Increasing Web Traffic to Landing Pages - Tracking Clicks, CTR, and Abandons

When setting up an attribution model in marketing, you typically have a dashboard in Google Analytics or another insight tool that can show you web traffic referrals. For example, if you are running Facebook campaigns with links to your website, you still need to have Google Analytics so that you can look under "Acquisition" and then "All Traffic" to see referrals.

You should see a list of traffic sources from here. If you have your Google Analytics set up to track revenue, you may also see how much revenue each channel is generating for you.

In addition, URL tracking is a must if you want to track channels and see what ads generate the most traffic for your website. Google has the Campaign URL builder tool to help you track each ad's performance. You can set up a custom URL per campaign, ad group, or ad. It's up to you how granular you want to be. We suggest using a different URL tracker for each ad group to measure targeting and audience interest.

The metrics that matter for tracking traffic include:

  • Number of clicks
  • Clickthrough rate or CTR
  • Cost per click or CPC
  • Total impressions or CMI
  • Abandon rate
  • Total traffic
  • Pageviews
  • Session time

Facebook and Google AdWords allow you to set up columns to track all of these metrics automatically. If a campaign is costing you $50 per day but only sending you 10-page visits with 0 conversions, then it's not working. It's time to re-think your targeting, ad visuals, and ad placements if you are not getting clicks and impressions from a paid ad.

Measuring Lead Generation = Cost Per Acquisition (CPA)

Every lead generation campaign should have a target CPA. This is the cost to acquire one lead, also known as cost-per-lead or CPL. Leads are important because they fuel your sales team and email marketing lists. You can also create audience lists to upload into your display ad campaigns on Google, Facebook, Twitter, Pinterest, and so forth.

When measuring the success of a lead campaign, it almost always boils down to CPA and the quality of the leads. If you have a high funnel abandon rate, which you can measure in Google Analytics, then you need to pinpoint what part of your form or customer touchpoint is not working to warm your lead.

Since sales cycles are typically longer with lead generation, you may have to look at quarterly ad spend and sales revenue to see how well your lead generation campaigns worked. However, digital marketing managers must look at CPL and CPA on a daily basis if they want to hit their target budget costs and deliver the most leads.

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