Technology has transformed the way that companies approach marketing. Social media, online advertisements, and blogging are all examples of ways marketers are using new media technology. Additionally, most small businesses are looking to invest more into digital marketing.
But while online marketing can be an effective way to build your business, it must be done strategically. After all, there’s no sense in investing money in marketing campaigns that don’t produce more conversions. Learning how to calculate and increase your digital marketing ROI will help you to maximize your profits.
Ready to learn how to improve your digital marketing ROI? Here are some of our best tips.
Before we dive into strategies for growing your digital marketing ROI, let’s start off by defining some terms. This will lay the foundation for the rest of our discussion.
What Is Digital Marketing?
Marketing is an effort or action by a business to promote its products or services. This can include researching to learn more about your target marketing, developing advertisements, and making special offers available.
Digital marketing, then, is any marketing effort that uses digital tools and technology. Common digital marketing efforts search engine optimization, content marketing, and email marketing.
What Is Return on Investment?
Return on investment describes the efficiency of a particular investment. Essentially, it measures how much value you get in return to the resources you put in.
To calculate return on investment, subtract the cost of the investment from the gain of the investment, and divide by the cost of the investment. The number resulting from this equation is a percentage that measures the efficiency of your investment.
The higher the percentage, the more efficient the investment is. If the percentage is negative, it essentially tells you how inefficient the investment is.
Improve Your Measurements
The first step to improving your digital marketing ROI is ensuring that you are recording accurate measurements. You can only know if your marketing efforts are successful if you have a reliable way of recording your gains from your investment.
Here are some measurements to make sure you’re tracking.
Visitors and Conversions
Of course, the ultimate goal of marketing is to increase your conversions. But while conversions are important, they are not the only consideration.
Studies show that customers often visit a website as many as nine times before they convert. For this reason, a marketing effort that drives visitors to your site can still be beneficial, even if it does not lead directly to conversions.
That said, it is important to measure conversions as well. So make sure to always track how many visitors each channel provides, and what percentage of those visitors convert.
Track Offline Efforts and Sales
Let’s say you attend a trade show or a networking event, and distribute business cards with your company’s website on them. Even though this activity is done offline, it can have a direct impact on your web traffic. So, whenever you use offline marketing efforts, make sure to use modeling to track their success.
Similarly, if your business also does brick-and-mortar sales, make sure to factor these into your calculations. In some cases, a customer will first encounter a brand through digital marketing, and then decide to visit the company’s physical location. Even if the customer converts offline, it can still be calculated into your digital marketing ROI.
Crossover and Multi-Channel Approaches
Most businesses with digital marketing strategies use a multi-pronged approach. For instance, they may use social media, content marketing, and pay-per-click ads.
While you may want to measure these efforts individually, you should also consider how they work together. For instance, does a customer get to your blog post by clicking on a social media link?
This information gives you an idea of the path your customers take to conversion. Knowing this can help you optimize the paths available.
Don’t Over or Undervalue Metrics
When you start measuring your metrics, it can be tempting to place emphasis on metrics that look flashy, but don’t have much value. For instance, getting a lot of likes and shares on Facebook or retweets on Twitter might make you feel successful. But these metrics have relatively little value, as they often don’t produce leads or conversions.
By contrast, businesses often underestimate the value of metrics like Google search engine results and search engine optimization. But the reality is that the majority of website traffic comes from organic search results. This means that improving your site’s ranking can be a significant source of leads.
Run Tests and Set Up Control Groups
Once you start measuring the success of your marketing efforts, it can be tempting to get obsessive. Some marketers start monitoring every slight change in their neighbors and tweak things constantly. In reality, though, changing your marketing strategy too much can make your measurements unreliable.
Instead, make sure to always give marketing strategies enough time to run their course before evaluating them. Also, consider running tests or using control groups to better understand your campaign.
For instance, one common approach is A/B testing. This involves using two versions of a similar webpage or advertisement and testing both with focus groups. This can give you insight into which versions resonate most with customers.
Focus on a Target Market
As you start looking at your data and metrics, you will start to notice that your product or service is more profitable with some demographics than others. Some businesses see this, and immediately start looking for ways to reach the other demographics. But this approach can often backfire.
If you try to create a product that appeals to everyone, you may end up with something that instead appeals to no one. So, instead of chasing every demographic, identify the groups that like your company, and focus on them.
Tailor your marketing campaign and preferred marketing channels based on the needs of your target market. Once you have built a solid customer base, you can consider moving to other demographics.
While overtesting can be a problem, becoming complacent can be an issue as well. Even if your current digital marketing ROI is decent, you can always work on making it better.
Test new marketing strategies frequently, and compare them to current metrics. This will help prevent you from falling into a rut with your marketing strategy.
Analyze Your Data
Measuring your performance is only half the battle. In order to get a strong digital marketing ROI, you also need to analyze your data. This will help you to better understand your target market, and make predictions about future behavior.
For instance, don’t just track how many visitors/leads/conversions each marketing channel produces. Instead, look out what kinds of visitors you get from each strategy.
Do customers from certain demographics seem to prefer one channel over another? If so, you can tailor content on those channels to customers in that demographic.
You might also want to consider what time of day you get leads or conversions. This can help you optimize when you publish content to get maximum impact.
Finally, consider how customers are visiting your site. Do they tend to be on personal computers or mobile devices? This information will help your design to better meet customer needs.
Don’t Overdo It
At some point, you need to calculate what the ROI is on calculating your ROI. While this might sound a little meta, it is important. Calculating your ROI can be a huge suck on your time, which can translate into lost profits.
Keep in mind that you can’t measure everything–so don’t try to. Instead, prioritize the metrics that you want to measure. Choose the marketing efforts that have the greatest impacts, and focus on these.
Once you have identified ways to measure your digital marketing ROI, the next step is to set some goals. You can remember a good approach to setting goals by using the acronym SMART. This stands for Specific, Measurable, Achievable, Realistic, and Time-bound.
Your goals for digital marketing ROI should set specific goals about how much increase you’d like to see. This goal should be set in a measurable unit.
In other words, don’t say you’d like to grow “a lot,” or “a good bit.” Instead, say you’d like your ROI to grow by a certain percent. This way, you will know if you have achieved your goal.
When you set your goal, make sure it is achievable and realistic. You don’t want to set yourself up for failure by setting a goal that is impossible. But you also don’t want to low-ball and set a goal that is far too easy to reach.
Finally, your goals should be time-bound. Set a date by which you’d like to see your ROI increase by a certain percent. This will give you motivation and positive pressure to move towards your goal.
Develop a Strategy
Now that you’ve identified your metrics and set some SMART goals, it’s time to develop your marketing strategy. Your approach to digital marketing will be much more successful if you’ve outlined a comprehensive strategy for how you plan to expand.
Make sure not to bite off more than you can chew with your strategy so that you can keep up as you scale. For instance, if you use social media to drive more customers to your website, you need to be able to provide excellent service to all of those customers. Growth can backfire if you grow too fast and customer service lags as a result.
Also, you want to make sure your strategy is diversified. Digital marketing trends change constantly, so if your approach to marketing must be flexible.
For instance, online marketers once relied heavily on ads to promote their businesses. But consumers have become wary of ads, and now use a variety of adblockers to avoid them. What was once a profitable approach with high ROI is now insufficient.
As the old saying goes, “Men plan and God laughs.” No matter how well-laid your plans are, the only certainty is that things won’t go as planned.
The key to success is hoping for the best but preparing for the worst. If your marketing does not go the way you plan, be ready to reevaluate and try something else. And, if you did the planning stage correctly, you should have some backup plans to fall back on.
Part of your job as a marketer is to try things that have never been done before. By the very nature of this work, it is inevitable that some of your efforts will fail.
But in some cases, a marketing attempt may only seem like a failure in the beginning. If you launch an expensive new marketing effort, the ROI might be negative for a while before it starts delivering significant returns.
Or, you may have a strategy that would be more successful, but just needs a couple minor adjustments. Rather than scrapping it whole cloth, work to see how small changes impact your ROI.
Be Jealous of Your Time
As a marketer, your time is one of your greatest assets. The more time you spend working on creative solutions and developing new strategies, the more successful you will be.
In order to make this a possibility, you must free up time that you would otherwise spend on menial tasks. One effective way to do this is with marketing automation.
For instance, rather than manually sending emails or updating social media, you can schedule these communications weeks in advance. This will give you more time to focus on work that cannot be automated.
Improve Your Digital Marketing ROI Today
With these tips in hand, you will be on your way to maximizing your digital marketing ROI. This will help ensure that you get the most value possible out of every dollar you spend on digital marketing.
If you would like to learn more about how to improve your digital marketing ROI, contact us. We’ll work with you to develop a marketing campaign that builds your profits and grows your company.