How to calculate digital marketing ROI
With the increasing demand for digital integration, businesses must understand how to properly calculate their Return On Investment (ROI) through the various media channels they are using. To do this, Econsultancy blogger Ben Davis suggests asking the following questions:
Your business case: What is your business case for calculating ROI? The obvious answer would be to determine the effectiveness of the money you’re spending on digital marketing, but the reality is that your business motivation may be more nuanced. Figuring this out early on can save you a lot of time in the future.
Frequency of measurement: How long can you control your marketing budget? Over what sort of timeline? Is it daily, weekly, or monthly? Davis says “You must determine how frequently you are actually able to take action based on your measurement.”
Sales baseline: Calculate what your sales and profits were prior to making a digital marketing investment. Then compare this with your post-digital sales and profits.
Business goals, KPIs: Understanding what your business goals and KPIs are well in advance will help you select the proper marketing tactics. And those tactics should be tied to your KPIs. Davis suggests, where applicable, to also consider using softer metrics like sentiment and engagement as they can relate to behavioural and emotional factors (of users/consumers).
Collecting data: How do you plan to collect data? Make sure you understand the digital platforms you’re pulling data from, your analytics program is properly set up, and be sure to create reports for review and comparison purposes.
Once you understand and trust your data, then you can move on to looking at ROI. This means choosing an attribution model that works for you.