Achieving excellent web marketing ROI (return on investment) is crucial for most businesses. Why? To know what you get in return for every $1 you put into a campaign or other web marketing activity.
The benchmark for your web marketing ROI depends on the purpose of your business and how you connect with your customers. Setting your ROI goals based on industry trends is a good start. But, understanding your own business trends and setting objectives based on this is the ultimate goal.
In the main, this is influenced by your definition of a conversion. For many ecommerce businesses, a conversion is registered at the time a product is sold through your website or another online seller on your behalf.
For many B2Bs, a conversion is when a quality lead is received after a visitor completes a contact form or downloads a lead generation guide on your website.
In either case, calculating ROI in the digital space is one of the easier ways to measure your activity. Each element is generally trackable and accountable.
How to calculate your web marketing ROI
Methods for calculating marketing ROI differ across businesses and is influenced not least by the complexity of the business’s reporting.
You must understand both the costs associated with your digital marketing activity and the returns you are receiving.
A good formula to use in this instance is: (Revenue – Investment) /Investment * 100 to reach a percentage.
What do you include in your web marketing costs? Simply, everything incremental that goes into the cost of the campaign. This includes:
- pay-per-click spend
- display ad clicks
- online media spend (websites, social media advertising, email marketing etc.)
- content production costs
- external marketing agency costs
Use this to understand the ratio as it compares to the return you get in sales or the value you attribute to a quality lead (versus a poor lead).
It’s important to understand a breakdown of your costs and returns as well. This will better pinpoint the areas that are most effective. And those that require further attention or to tone down in the next campaign.
What tools can I use to measure web marketing ROI?
With the right pixels and coding implemented on your website, digital marketing is easy to report on.
Use analytics reporting from any of the platforms you are conducting your digital marketing. This includes social media platforms, email marketing software and your own web analytics tools. It also includes Google’s products such as Google Analytics, Google Search Console and Google My Business.
These each provide a range of metrics that can be compared across platforms or activity. But importantly, they allow a great deal of granularity to understand your audience and adjust your activity to a more personalised experience for them.
What am I aiming for?
This answer largely depends on areas including the product or service lifecycle, the marketing touchpoints involved, and your cost of goods sold (COGS). Those businesses with a higher gross margin do not need to achieve a high ratio before making good returns on spend. However, tighter margins will demand higher ratios of return on investment.
Some campaigns using social media, video marketing and other content marketing involve costs. Further, they start long before a purchase is made, or a lead generation document is downloaded. Attribution modelling is complex and plays a part in how you define costs and returns as well.
As a benchmark, a good starting point for most businesses is 5:1 (a return of $5 for every $1 you spend). This covers the costs associated with many products and allows for profit to be made.
Improve your web marketing ROI with two parts: conversion rate optimisation and minimising web marketing cost. Concentrating on these two parts separately ensures you maximise your marketing activity to your audience’s benefit and in the most cost-effective way for your business.
Looking for some more guidance on improving your web marketing ROI? Receive our FREE Digital Marketing eGuide here.