What is ROI? How to Improve and Calculate Your Digital Marketing ROI?

What is ROI? How to Improve and Calculate Your Digital Marketing ROI?

Posted on: 21 Dec, 2024

Joe asks John how his marketing works? What was Joe asking about?

Joe wanted to know whether John's marketing is generating awareness, generating foot traffic, or generating sales, and His strategies effectively profitably generating business or not.

John as a marketing manager of a company got nicely settled with his team, and a nice budget spent on Social media ads, google ads, and email marketing. He is responsible for spending money to generate revenue and should have a simple way to know if their activity is producing business.

After a few months, your CEO suggests presenting the ROI of your Digital Marketing spending at the next board meeting?

ROI? What?

Hold your horses! It is not that complicated.

ROI stands for Return On Investment, it is simply a measure of money gained or lost on an investment. To put it in simpler terms ROI is what you expect back from what you're spending as an investment. Digital Marketing Campaigns are investments and like smart investments, they need to be measured to make sure the money was spent wisely.

To maximize your business's marketing dollars, you just need to focus on digital marketing as a channel that will give you the Best Return On Investment ( or Digital Marketing ROI).

Few Proven Digital Marketing Ways to get positive ROI for your business.

A positive ROI means your marketing investment is working and your business is growing, so you should aim for that when you're crafting your strategies.

The exact profit of the campaign is usually more difficult to establish especially when you're running several campaigns simultaneously. So, John optimized his campaigns well, you can see positive ROI from most of the Digital Marketing Ways.

Email Marketing

Email Marketing is the most effective and highest ROI digital marketing channel to connect with customers, build subscriber lists, reach the target audience, and build brand loyalty. This work for a business that goes through prospects and customers also has products and strong sales.

SEO

If you do Search engine optimization properly, then this delivers you a higher ROI. This is a powerful channel to get organic results, increase sales, brand awareness, and brand authority. But this takes time and money to develop.

Paid Search and PPC

Search engine marketing (SEM) provides you visibility, exact targets, quality leads, customer development, trackable, usable, detailed information. SEM works well for all types of companies who want to reach relevant customers. Paid marketing focuses mainly on search terms and target audience. PPC works with Google AdWords, this helps you to research keywords and to select an effective campaign, also you can have a track using Google Analytics.

Social Media Marketing

Social media channels are an effective way to reach an audience by using Facebook, Instagram, Twitter, and LinkedIn, allowing them to build relationships with their prospects, followers, and customers. This has two-way communication which builds customer relationships. This is extremely valuable for companies who are looking to engage with the customer, here you will get both organic and paid social media marketing.

Content Marketing

Everything on the internet is websites, videos, blogs, creative, etc, ways to interact with the audience. These all interact only with content in numerous ways. This leads to drive website traffic, brand awareness, brand loyalty, and an increased conversion rate.

So how can you calculate ROI?

There are several ways to do this, but the simpler way is:ROI = (Profit - Investment cost)/Investment cost

This calculation results in positive or negative percentages.

If the marketing campaign doesn't have positive ROI then it shouldn't be undertaken. If a marketing campaign generates 70% ROI and the other 150% odds are you are spending your marketing budget on the campaign with the highest performance.

However, calculating the ROI of marketing efforts can be tricky. The easy part is the investment side, it is typically just the cost of a Digital Marketing Campaign. But it might be interesting to also include the cost or time invested by people.

The exact profit of a campaign is difficult to establish, especially when you are running several campaigns simultaneously. Or when your sales process is a long and complex one. In these cases, you might simplify ROI calculations. A simple ROI calculation is better than none at all.

Some marketing efforts are not meant to generate direct profits in the short term, but to increase brand awareness or purchase intent. But even then it is important to define the right metrics.

If you're marketing then ROI is your friend. Even though many CEOs are convinced that marketing is key to business success. It's still one of the first budgets to be cut when time gets tough.

So calculating your ROI helps you to justify your marketing efforts. The better you understand the ROI the more you can continually improve your marketing investments.

It will help you to spend your budget on campaigns that yield high returns for your company.

After all, making money is what you are in business for.

Do you like to know more about digital marketing ROI? Need digital marketing ROI Service? Contact Us. We help you to maximize your ROI by creating a customized strategy for your business and improve performance.