Amid all of the marketing goals for any ambitious campaign is one that reigns supreme: to make money. Sure, bringing in more organic traffic, generating new leads and increasing brand trust are goals, too. But, they all culminate in cash flow eventually (and hopefully).
So, how can we measure the return on investment (ROI) for marketing campaign spend? After all, putting together a winning campaign isn’t free — it costs a lot of time, money, effort and care. Measuring our campaign success here can give us insight into how well it performed and provide ideas for next time about how to improve certain aspects that may have missed the mark or not accomplished what we’d hoped.
Here’s everything you need to know about marketing campaign ROI including what it is, how to measure ROI, what a healthy marketing return is and strategies for improvement.
What Is Marketing Campaign ROI?
ROI in marketing is a bit weird. So weird that some prefer to call it return on marketing investment or ROMI because investing in marketing isn’t the same as investing in, say, a product. But, for our intents and purposes, we’re going to stick with using ROI for the simple fact that it’s more widely understood and, in our books, pretty much means the same thing, anyway.
So, what is marketing campaign ROI? Before diving into measurement specifics, you need to know that digital marketing ROI tells us how successful a particular campaign was, i.e., if it was worth the money that was spent on it. But, how do you determine its worth?
Well, there are a couple ways, but the most important is by how much money the campaign brought in. Let’s find out how to measure that.
How To Measure ROI for a Marketing Campaign
Simply put, marketing ROI is calculated by measuring the money spent on a marketing campaign against the revenue that the campaign generated. However, further supporting that figure with other relevant key performance indicators (KPIs) can help give you a more holistic idea of how a campaign performed outside of just how much money it did (or didn’t) make.
And, while there are myriad online calculators out there that can spit out marketing campaign ROI with just a few simple clicks, there’s more to it than that.
Here are a few digital marketing metrics that organizations can use to measure a campaign’s success and determine its ROI:
Return on Ad Spend (ROAS)
ROAS is quite simple, so we’ll start with it. To calculate this metric, simply divide the revenue that can be attributed to a particular ad campaign by the amount that was spent on the same campaign. So, if you spent $2,000 on ads in a month that generated $5,000 in revenue, the equation would look like this:
5,000 / 2,000 = 2.5, or 250%
Since this metric measures paid advertisements and display ads rely heavily on messaging, it’s a great way to measure how well they resonated with your customer base and audience. The higher your ROAS percentage, the better you can assume that your ad messaging is effective. If it’s on the low end, there’s probably some room for improvement.
Click-Through Rate (CTR)
CTR is a metric that shows us how often people are actually clicking on our ads on major search engines. This one is pretty simple, too. To find it, just divide the number of clicks by the total number of impressions on any given ad, like this:
Clicks / impressions = CTR
So, if an ad received 1,000 impressions and 100 clicks, your CTR would be 10%.
CTR is a critical metric for pay per click (PPC) advertising and can actually impact your ad rank and quality score. The higher the CTR, the better your ad rank will be — so long as it’s relevant to users based on your keywords, ad copy and landing pages.
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Customer Lifetime Value (CLV)
CLV is a metric that predicts how much an individual customer is likely to spend on your brand over the duration of your customer-brand relationship. CLV is unique in that instead of measuring past activities such as purchase history, it’s forward-looking. This gives you an opportunity to forecast future customer activity to help improve marketing and sales.
Calculating CLV isn’t as simple as some of the other metrics here. You’ll need a few extra items for this one, including:
- Average purchase value: This can be calculated by determining how much a particular customer spends on average per transaction.
- Average frequency rate: This number represents the total number of purchases over a specific period.
Once you have the numbers for those two items, multiply them together to find your customer value. Then, multiply that by the average customer lifespan. The equation looks like this:
CLV = customer value x average customer lifespan
Calculating CLV as part of understanding marketing ROI is important because it’s cheaper to maintain current customer relationships than it is to acquire new ones.
What Is a Good Marketing Campaign ROI Percentage?
A 5:1 ratio of return on marketing spend is considered good ROI across the industry. Going higher, 10:1 is considered an exceptional ROI in most circles. This goes for campaigns that are running on any given marketing channel out there. So, while we may not be able to separate the good from the great on a per-channel basis, we can discern which channels are more likely to produce good and exceptional ROIs.
Let’s take a look at the top four:
Pay-Per Click (PPC)
A well-produced PPC campaign contributes to organic traffic flow and sales simultaneously, so it doesn’t get much better than PPC if you’re looking for fast and reliable results. Some of the most popular ad networks, like Google Ads, can even calculate campaign ROI automatically in addition to storing a mountain of data that you can use to help boost your bottom line.
Search Engine Optimization (SEO) and Content Marketing
If you’re in it for the long game (and you should be), there are few marketing tactics that work better than SEO to drive stable traffic volumes, generate leads and encourage conversions. And, because SEO is a multi-faceted strategy, there are both short- and long-term benefits.
For example, on-page SEO (i.e., optimizing your content and webpages for search engines) can start to drive results relatively quickly (not as quickly as PPC, though). And, off-page SEO, like link building strategies, are perfect for driving lasting brand awareness and solidifying your authority over time.
Email marketing ROI is fruitful. While the medium itself may often be written off as antiquated by marketing outsiders, it actually boasts one of the highest ROIs in the content and digital marketing industry. Believe it or not, marketers see a return of about $36 for every $1 spent on email marketing. That’s high.
Why is email still so successful, though? Because it can be highly personalized, it’s dynamic and can be A/B tested easily (more on that later).
Lo and behold: social media. We all know it, and we’re split on loving and hating it — at least in our personal, not-marketing lives. But, if we’re sticking to marketing, we love it. Social media is a powerhouse of a marketing channel, not only because so many people are on it, but also because it plays perfectly to our attention spans while being both interactive and engaging.
One of the main reasons social media has such a great ROI is because having an account and posting is free — for now (we’re looking at you, social media CEOs). Publishing regular, high quality social content and interacting with your community is a great way to drive long-term ROI. Because, like SEO, social media is a long game … unless you can cook up a viral campaign, then it can be near-instant.
5 Ways To Improve Marketing Campaign ROI
For your marketing effort to improve your businesses bottom line, it’s critical to make sure you’re conducting the right testing, pushing your campaign on the correct channels and, in general, doing your due diligence. To have the best shot at success, follow these 5 items that can help boost the ROI of your marketing campaigns:
1. Try Different Channels
Not all channels are made equal in digital marketing. Some are more effective than others for specific pieces of content or campaign collateral, while others are a mixed bag that are good for just about anything.
That’s because each channel often has a unique audience, specific demographic or is built to facilitate certain types of content. If you’re unsure where to start, reference the list just above this. Those are all great places to start when executing a digital marketing campaign, and each has a proven track record of generating generous ROI when used correctly.
2. Do Market Research
If you want your marketing assets to resonate with your target audience (and boost your ROI), you need to do market research. Consumer behavior is changing all the time, and what customers want from brands changes, too. Gathering quantitative and qualitative data about your target market will help you tailor your campaign more precisely, making consumers more likely to engage with it.
3. Conduct A/B Testing
Sometimes called split testing, A/B testing is a common marketing technique wherein two different versions of an asset (landing page, email, etc.) are shown to two segments of your target audience at the same time. The goal is to get a better understanding about which version is more successful before pushing it out for everyone to enjoy. If there are gaps in your market research or your team can’t quite agree on a final design for, say, a newsletter, A/B testing can help!
4. Personalize Your Campaigns
Personalization helps marketers build trust with and maintain relevance among their audience — and customers want it. In fact, 71% of consumers today flat out expect personalized experiences, and 76% get frustrated when they don’t get it.
Since a higher percentage of consumers get frustrated when they don’t get a personalized experience, I think it’s safe to assume that more than 71% of people expect it. Perhaps they were just being too polite on that particular survey. All that to say: Personalization can boost ROI, and you may even be able to steal some from your competitors if you can offer a better experience!
5. Avoid Vanity Metrics
Vanity metrics are numbers that, while attractive on the surface, do little to help you understand a campaign’s actual performance and ROI. Worse still, vanity metrics can artificially inflate your calculations and give a false impression of success, which can hinder future strategies.
Instead, digital markers should focus on actionable metrics which are just as they sound: metrics that you can act upon to improve campaign performance. Here are a few examples of each to help give you a better idea:
A couple vanity metric examples:
- Follower count: While having a large follower volume looks great, it’s seldom an accurate reflection of actual engagement, which is a much more valuable metric.
- Raw page views: Lots of marketers track page views, and yes, many page views are good. However, page views alone don’t provide the context digital marketers need to convert leads. To do that, it’s better to know where these page views are coming from and who they are. That way, it’s easier to tailor future campaigns to those demographics.
Intead, opt for the metrics that we outlined above, as they help provide more context on customers and customer segments and can produce actionable insights for your next marketing campaign.
There you have it: marketing ROI and its nuances. Hopefully, you come away from this blog with a better understanding of ROI in marketing and how to calculate it. Now it’s time to put these action items to work — so, start tracking those metrics and taking steps toward more effective marketing campaigns that will help improve your bottom line.