A key and strategic element in digital marketing: measuring ROI – return on investment to ensure its impact on the profitability and sustainability of the business.
There are several digital marketing strategies depending on the objectives that are intended to be achieved, the means available, the characteristics of the products or services offered, as well as the characteristics of the market; However, when measuring a digital marketing campaign, what is the criteria we need to take to identify whether or not it is being successful? If I’m investing in digital marketing, it makes sense to see some results; but how do I know if these results are sufficient or insufficient? It’s amazing how many companies, even some of the biggest ones, fail to recognize whether their digital marketing strategy is successful or not.
To do this, the first thing to define is the objective that the company has with its strategy and its tactics in digital marketing, for example get more customers, better sales, get to know our market segment better, gain positioning, increase profitability, etc. Many times the number of customers increases, the number of sales, we get more information from the market, but this does not necessarily translate into higher profits or sustainability. This is why the main factor to measure is called ROI (Return On Investment) or return on investment during the process of executing a strategy or for each digital marketing campaign.
ROI, is the way to measure whether the investment of financial resources, time and effort that we are making in digital marketing, results in us being able to recover this investment and we manage to improve not only the profitability of our business, but also its ability to be sustainable over time taking into account changing market conditions and consequently the needs of products and communication channels and customer relationships.
How is ROI measured?
To measure it, consider the following steps:
1. Formulate financial objectives of the digital marketing campaign. Lean on questions like: what profits do I expect to make from marketing strategy? How long do I intend to recover the investment? How many new customers do I expect to get and what cost am I willing to pay for it? In this exercise you want the goals to fit real possibilities, it is worth dreaming but always looking for a balance between what you want to achieve and the means and time I need to achieve it.
2. Based on objectives, KPIs or key performance factors are defined. To achieve this, we just need to define the indicators with which I will measure the success of the digital marketing campaign or strategy. These six KPI metrics can help:
a. Customer Acquisition Cost (CAC) – Sales and Marketing Expenses / New Customers.
b. % of Marketing in the CAC – Marketing Costs / Sales and Marketing Expenses.
c. Customer Time Value Ratio to CAC (LVT:CAC) – What the customer pays in a period – gross margin / customer cancellation rate for the customer (LVT) in relation to the CAC.
d. CAC recovery time: CAC / Revenue with Performance – Adjusted.
e. % Customers Generated by Marketing – New customers started as a marketing sales opportunity / New customers in one month.
f. % Customers influenced by Marketing – Total new customers who interacted with marketing / Total new customers.
3. Measure and interpret the results and this way you will know if your strategy is successful and you are spending money on what is important.
If you want to know more about how to measure the ROI of your Digital Marketing campaign contact us and be part of an innovative and successful experience that will open up your business possibilities in the digital market to a world of constant growth and new ways of seeing and doing business.
