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How To Calculate ROI In Digital Marketing?

ROI In Digital Marketing

 

 

Digital marketing isn’t your company’s “magic”, it has to be regularly monitored and measured and often tweaked, and one of the best ways to do so is to measure the effectiveness of your marketing campaigns, and that could be done through ROI In Digital Marketing. 

 

What is better than knowing if your business is making a profit or not? Knowing that every dollar that you spent will return to you in the form of increased sales and huge success of your business. 

Now you can easily know if your business is making its way in the market or not through ROI. 

 

Return On Investment or ROI is an important part of your digital marketing, it is your guide that tells you whether you are getting your money’s worth from your marketing campaigns or not. 

 

And if you are not it is important to know and understand why your business is not making any progress and improve your marketing campaigns, you can do that through the ROI. 

But first, you need to learn How To Calculate ROI In Digital Marketing?

 

Keep on reading the next few lines and you will know How To Calculate ROI In Digital Marketing, and why ROI is so important in digital marketing, and what does it mean to have a good ROI. 

 

What is ROI? 

 

First of all, and before knowing  How To Calculate ROI In Digital Marketing, you need to know what RIO is. As mentioned above, ROI stands for return on investment. Basically,  ROI is the key performance indicator that is used by the business to determine the profit of their marketing campaigns. 

 

How To Calculate ROI In Digital Marketing is one of the most important parts of the digital marketing process, which we will know later on this blog, however, bear in mind that ROI is a very useful tool for measuring the success of your business over time. The ability to calculate return on investment is extremely valuable for any business, whether it is a startup or a huge firm. 

 

After all, as a businessman, all you need to know is knowing if you are getting your money’s worth or not. By calculating ROI, you can understand better how well your business is doing and which areas need more improvements, and that can only be done if you understand well how to calculate ROI in digital marketing. 

 

How To Calculate ROI In Digital Marketing?

Now you get to the point to know and fully understand how to calculate ROI in digital marketing. 

To simplify this, ROI is calculated using two primary metrics and they are the cost to do something and the outcomes generated as a result which means the profit that you get from your marketing campaigns. 

 

And to answer your question how to calculate ROI in digital marketing is through formula. 

 

(Attributable Sales Growth – Marketing Cost) / Marketing Cost = ROI. 

Calculate ROI In Digital Marketing

 

You can either calculate ROI using the very traditional way, and that will require accessing your business finance, which is not a very practical way and your business needs a better method and that is the revenue to marketing cost ratio. 

 

Simply the revenue to marketing cost ratio means how much money you will get for every dollar that you spent in your marketing campaigns. For example, five dollars in sales for every one dollar spent in marketing yields a 5:1 ratio of revenue to cost.

 

And this ratio is a good ROI, A 5:1 ratio is in the middle of the bell curve. A ratio over 5:1 is considered strong for most businesses. Having a ratio of 5:1 means that you have a good ROI. 

 

What does it mean to Have A Good ROI? 

 

Let’s imagine this, you spent 1$ on digital marketing, how much should you get in return? 

Here is your answer, How to identify if your marketing is working well or not? Is it generating awareness, generating foot traffic, or generating sales? 

 

Anyone responsible for spending money to generate revenue should have a simple and accessible way to know if their activity is making progress with the business. 

 

Having a good ROI means that for every 1 dollar that you spend you get 5 dollars in your profit and that is a good RI in the digital marketing world. 

Why Is ROI Important in Digital Marketing? 

 

So you might ask yourself why ROI why calculating RI in digital marketing are so important? 

And to simply answer that we can say that Calculating ROI in digital marketing gives you valuable insights that you can use to improve your marketing strategy and choosing the right campaigns, just by following your ROI measurements.

 

By following ROI measurements you can know the following: 

 

Where to Spend More Money

 

The most obvious insight that you will get from ROI is where you should spend more money to improve your marketing. 

 

How to Twerk Your Marketing Strategy 

 

Similarly, measuring ROI in digital marketing will help you adjust your marketing goals and strategy depending on your customer’s behavior. 

 

Tools Will Help You Calculate ROI 

And here are some tools that will help you calculate your ROI and make your marketing strategy more profitable. 

 

1- Google Analytics/ Ads: 

 

Using Google Adwords is important for marketers who want to measure the success of their organic traffic and the success of their online campaigns. 

Through this data, you can gauge the success of your campaigns and make adjustments as needed to improve profitability.

 

2- CRM Software: 

By using CRM  software you are willing to maintain a healthy relationship with your customers, by streamlining interaction and gathering important customer data. 

 

3- Call tracking Software: 

By using Call tracking you can track online and offline marketing campaigns, through Cal tracking Software you can determine which are leading to phone calls and conversions, allowing you to pivot your strategy accordingly.

 

To cut the story, it doesn’t matter if you are going to hire a manager or a marketing director,  Practically every business decision requires knowledge of ROI. If you’re not sure whether or not your efforts are yielding results, how can you properly optimize profitability? Understanding the importance of ROI is crucial for any business to succeed.

 

Sources:  What Is A Good Marketing ROI?

Measure the ROI of Digital Advertising Beyond Revenue Impact

Importance of ROI: Why it matters for all businesses