Digital marketing campaigns need to be treated as investments.
The best way to connect a digital investment to wider performance is through Return on Investment (ROI). However, with numerous variables and different attribution methods for marketing results, it’s not as straightforward as one might initially think.
This guide covers how to calculate the ROI of marketing spend using key digital marketing measurement metrics. Tactics vary when it comes to campaign ROI calculation, so understanding these marketing ROI metrics is a smart place to start.
1. Unique Monthly Visitors
This metric lets you know the number of people who visit your site every month. While it’s a helpful metric, it doesn’t give you any information about how valuable this traffic may be.
There is no need to calculate anything because Google Analytics will track it for you. If you want to be more specific, you can segment the traffic by source (paid, organic, social, etc.), and then look at value-based metrics for each segment.
ROI data can be gathered through analytics.
2. Cost Per Lead (CPL)
This metric allows you to determine if your digital marketing campaign is successful by calculating the amount spent on each lead. This is usually associated with paid traffic, as you would not need to pay for organic traffic.
. This is a metric that is used to calculate how much it costs to generate a conversion from an advertisement.
- It is up to you to make sure that your conversions align with what you consider to be a ‘lead’. Over or undercounting can result in skewed cost-per-conversion data if it’s not set up properly.
You are not paying for leads on the organic side. You are paying for SEO strategy and content marketing.
Although these efforts may eventually result in lead generation, it can be difficult to determine how much each individual lead costs.
3. Cost Per Acquisition
This metric indicates how much it costs to acquire a customer, not just a lead. Paid campaigns can see this information in almost real-time, and while this metric doesn’t directly relate to SEO, you should be able to see your overall Customer Acquisition Cost across all digital platforms.
The result is your CPA/CAC ratio. CPA/CAC is a metric that can be simply calculated by dividing your total digital marketing spend by your number of acquired customers. This ratio is your CPA/CAC.
This formula tells you what you’re spending to acquire each customer on average.
4. Return on Ad Spend
This metric tells you the revenue earned for every dollar spent on ads, but it doesn’t take into account other costs like the cost of the goods themselves. ROAS can be useful if you can directly tie revenue to digital marketing efforts.
However, you need to have a good understanding of your profit margins to know what ROAS percentage you need to be profitable.
If we think of the return on investment for digital marketing as the ratio of net profit to total cost, then the return on ad spend would be the ratio of revenue to total ad spend.
This means that you would have made a $200 profit if you had not spent any money on ads. If you spend $100 on ads and receive $300 in revenue as a result, but your product also costs $100 to make, you would have made a $200 profit if you had not spent any money on ads.
Your ROAS would be 3 times your investment, but your ROI would only be half of your investment.
5. Average Order Value
AOV is a metric that tells you how much each paying customer is worth in each instance that they purchase. AOV is most useful for E-Commerce stores, but services and B2B businesses can use the next metric instead.
If we multiply the Average Order Value by the repeat rate, we get an even more valuable metric for E-Commerce, which is the Customer Lifetime Value.
6. Customer Lifetime Value
This statistic measures how much you can afford to spend on advertising to acquire each customer while still making a profit. LTV is important for all businesses to know.
E-Commerce can get an exact calculation for LTV.
Other industries may need to come up with a less specific projection, or could possibly use historical customer data to predict what LTV might look like.
7. Lead-to-Close Ratio
This metric can help you determine if your leads are high quality, if your sales are efficient, and also project your digital marketing ROI.
The number of leads that have been closed divided by the total number of leads is what is known as the Lead-To-Close Ratio.
The lead to close ratio (LTCR) is a metric that measures the effectiveness of your sales team in converting leads into customers. To calculate your LTCR, divide the total number of leads by the total number of closed leads.
We can calculate digital marketing ROI by taking our LTCR, COGS, and CPL into account. If we know these numbers, we can determine how much ROI to expect from our digital marketing efforts.
We close 25% of our leads, which means we have a lead-to-close ratio of 4.
- Our cost per lead is $10. LTV is $200 and our cost of goods sold over that lifetime is $80.
- We’ll shorten the formula by assuming that our Customer Acquisition Cost (CAC) = LTCR*CPL.
The cost of acquiring a customer (CAC) is equal to the cost of four sales multiplied by the price of each sale. In this example, that would be $40.
- From above, ROI = (Net Profit/Total Cost)*100
- Projected ROI = [(LTV-COGS-CAC)/(COGS+CAC)]*100
- Projected ROI = [($200-$80-$40)/($80+$40)]*100
- =($80/$120)*100
- =66.7%
This post from Search Engine Journal might help clear up confusion about calculating digital marketing ROI. You can also reach out to an Augur today for more detailed annual ROI discussion.
8. Branded Search Lift
This metric measures the increase in brand awareness over time that is a result of digital marketing efforts.
The branded search lift is the number of monthly searches that include a brand name. This can be tracked over time to see how many additional searches are being performed for a brand.
This is usually the result of all of your digital advertising campaigns, not just search marketing.
9. Average Position
This metric measures how often your site appears in search engine results for certain keywords.
The average position for organic can be found in Google Analytics, and the average position for paid can be found in the publisher platform.
- An average position of 1 would mean that you show up as the top result for every single keyword.
- If your average position is dropping closer to 1 over time, then your SEO and content marketing efforts are starting to have positive results.
A lower average position on a search engine results page will typically lead to more clicks on the website, resulting in more traffic.
10. Non-Branded CTR
The metric of how well your SEO campaign is performing can be tracked through Google Search Console.
CTR for ads that are not from a specific brand are also taken into account by Google and other advertisers when deciding how high to place the ad. This metric is tracked in AdWords and other places where ads are published.
This metric cannot be directly connected to the number of leads, revenue, or ROI that comes from internet marketing, but in a lot of cases, you will see that there is a positive connection between them.
8 Ways to Measure B2B Marketing ROI
1. Conversions by Medium Report
This report can be customized to better suit your needs and is very useful for keeping track of your monthly progress.
I highly recommend this report for anyone using multiple online marketing strategies. To find this report, go to Conversions > Multi-Channel Funnels > Assisted Conversions in Analytics.
Under the Explorer Tab, select Conversions. You’ll see a basic break down of website conversions based on the Medium (Organic, Paid, Referral, Direct), with the total value.
From the dropdown menu, you can create a custom channel grouping to get a clearer picture of which medium is bringing in the most money. In this case, it looks like Organic Search – Unbranded is responsible for the majority of revenue.
2. Assisted Conversions by Medium Report
assisted conversions. These are conversions that happen after a person has interacted with your brand on more than one medium. This report can be found by selecting “Assisted Interactions Analysis” on the Explorer Tab in the previous report.
The column labeled “Assisted Conversions” shows us which traffic mediums played a role in a conversion, even though they did not receive credit as the main source for the conversion.
If the traffic medium you’re using isn’t converting, make sure to check assisted conversions too. It may be playing a key role in the conversion process!
3. Top Conversion Paths Report
You can find the Top Conversion Paths report under Conversions > Multi-Channel Funnels in Google Analytics. I love sharing this report with clients because it demonstrates how people arrive at a conversion on their site through multiple channels.
4. MarketingCloudFX reports
WebFX uses its own software to help clients determine the return on investment for their campaigns.
Only MarketingCloudFX clients can access the software and the data it provides. The software contains tools, like LeadManagerFX and CompanyTrackerFX, which give businesses a clear view of how their marketing efforts are working and where leads are in their journey.
This data can help you understand your customers’ journey, which can lead to improvements in your content marketing, search engine optimization (SEO), and any other digital marketing tactics your company uses.
5. Set Up Website Tracking Software (i.e. Google Analytics)
Before you can calculate your return on investment (ROI), you need to set up website tracking software. This may seem like an obvious step, but there are many business-to-business (B2B) companies that do not have a plan for measuring their internet traffic.
Not knowing what’s going on is not a good thing! Internet marketing is easy to keep track of compared to other marketing methods, so take advantage of that! I believe that Google Analytics is the best software for tracking purposes.
It’s easy to set up, it’s free, and it gives you a lot of information that you can use to create custom reports and set up email notifications for when traffic drops.
6. Make Sure You’re Looking at the Right Data
If you only look at the overall traffic when measuring the ROI of your B2B marketing, you are making a mistake.
6.1 Unbranded, Organic Traffic
This non-paid traffic data encompasses people who are not familiar with your brand.
From the Acquisition tab in Analytics, select All Traffic and then Source/Medium. Set Keyword as your Primary Dimension and Medium as your secondary dimension. Then, select the advanced filter and choose Exclude, Keyword, Containing, and enter your company name.
To filter your data by medium, click “Add a dimension or metric,” then select “Medium” from the dropdown menu. Enter “Include,” “Medium,” “Containing,” and “organic” in the corresponding fields.
6.2 Branded, Organic Traffic
This data includes non-paid traffic for people who are already familiar with your brand but did not type your website directly into their browser. These are people who may have seen your website on a social media platform or as a result of an email campaign
To find unbranded traffic, follow the same steps as above, except include keywords that include your company name. If there is not a lot of traffic for your brand, you may find that you are not even ranking #1 in Google for your brand.
6.3 Paid Traffic (if Applicable)
The main difference between organic and paid traffic is that organic traffic is free while paid traffic costs money. With organic traffic, you earn clicks from people who see your content through search engines or other platforms. With paid traffic, you pay for each click on an advertisement that leads to your website.
You should absolutely analyze your paid traffic regularly to ensure you’re getting your money’s worth. A high bounce rate could be indicative of a problem on your website, such as a lack of a clear next step for users. Alternatively, it could simply mean that the traffic you’re receiving is not relevant to your site.
Navigate to Acquisition > Campaigns > Paid Keywords and select “Search Query” from the Primary Dimension drop-down menu.
6.4 Referral Traffic
Referral traffic on your website comes from clicks on links to your website from other websites. You can view how much referral traffic you have by going to Acquisition > All Traffic > Referrals.
6.5 Direct Traffic
To view direct traffic data for your website, follow these steps: Acquisition > All Traffic > Channels. Then, select “Direct.”
7. Set Up Measurable Conversions in Google Analytics as Goals
A easy way to track conversions from forms on a website is to have a unique thank you page for each form (contact form, quote request, newsletter sign up, etc.) and then track how many times that page is viewed as a goal.
Admin > View > Goals is where you can set up a registration page. Below is a screenshot of what it should look like. You’ll need to assign a value to each goal, for example, how much money someone contacting your company is worth, or the value of someone registering for an event.
8. Use the B2B Marketing ROI Formula
First, calculate your revenue from digital marketing.
This will need to be calculated after a whole year’s worth of data has been collected, depending on how long it takes for your business to get new leads.
For example, if you had 30 contact forms filled out in May and 15 of those turned into customers, your conversion rate would be 50%. If you had 5 newsletter sign-ups and 1 of them became a customer, then your conversion rate for that would be 20%.
Determine the value of a lead for your company. If you haven’t already, you’ll need to assign a value now.
Start Measuring (and Improving) Your B2B Marketing ROI
Although there are many methods to calculate ROI and find out what is most successful for your B2B company, these have shown to be the most powerful in terms of measuring ROI for B2B marketing.
Even though it takes some time to set up Google Analytics in the beginning, the effort you put in at the start allows you to monitor your website’s ROI and compare information from month to month and year to year.
This process will help you focus your time on areas that will give you the best return on investment, and allow you to demonstrate to your boss, shareholders, or board of directors that you are competent and in control.
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