How to Measure and Improve Your Digital Marketing ROI

6 metrics to track when calculating digital marketing ROI

Metrics to track when calculating online marketing ROI

1. Cost per lead (CPL)
2. Lead close rate
3. Average order value (AOV)
4. Click-through rate (CTR)
5. Customer lifetime value (CLV)

When calculating the ROI of your online marketing efforts, it’s important to track and measure metrics that directly tie to revenue, profit, and other actionable metrics that relate to the goals of your business.

Here’s a look at some useful metrics for calculating Internet marketing ROI:

1. Cost per lead (CPL)

Formula: Ad spend / number of attributed leads = cost per lead

If you’re collecting leads as part of your marketing campaign, you’ll want to calculate cost per lead, which is how much it costs you to acquire each lead.

To determine cost per lead, you can divide your total marketing costs by the total number of leads you gained due to your campaign.

Comparing your cost per lead to what each lead is worth to you will tell you whether you’re getting a positive ROI.

2. Lead close rate

Formula: Conversions / number of leads = lead close rate

Do you know how many of your leads become customers? This metric is known as your lead close rate or conversion rate.

This metric is important because your leads only provide financial value if they close. Determining how many leads you need to close to achieve your ROI goal helps you set goals for your sales team.

It can also indicate the quality of the leads you’re attaining. If you have a low lead close rate, you may want to consider adjusting your targeting to attract better-qualified leads.

Evaluating your lead close rate by channel, device, demographic characteristics, and other factors is also helpful. Segmenting your leads can help you determine which channels and audiences to focus on for the best return on investment.

3. Cost per acquisition (CPA)

Formula: Cost of advertising / number of conversions = cost per acquisition

Your cost per acquisition is how much it costs you to get a sale. Calculating cost per acquisition will tell you how much you need to make from each sale to achieve a positive ROI.

To calculate this metric, divide your total marketing costs by the number of sales you earned.

4. Average order value (AOV)

Formula: Revenue / number of orders = average order value

As you saw in the earlier section about how to calculate online marketing ROI, knowing your average order value can help you calculate your ROI.

You may also want to keep track of your average order value so that you can set goals for increasing it. Even increasing your average order value by a small percentage can result in a significant increase in revenue.

5. Click-through rate (CTR)

Formula: Total number of clicks / total number of impressions = CTR

You’ll also want to evaluate your click-through rates (CTRs) for your PPC ads, organic search results listings, email links, and other campaigns.

To calculate your CTR, divide your total clicks by the total number of impressions, which is the number of people who saw your ad or organic search listing.

If your CTR is low, you may need to adjust your targeting or change your copy or design. Higher CTRs tend to correlate with higher ROI.

6. Customer lifetime value (CLV)

Formula: (Average annual revenue from a single customer x the number of years someone typically stays a customer) – your cost per acquisition of one new customer = CLV

To get an accurate picture of your ROI, you need to determine your average customer lifetime value (CLV), which is how much a customer is worth to your company over the total amount of time they’re a customer.

Without CLV, if you spend $100 marketing to someone and converting them into a customer, and they make a purchase worth $50, you might think you had a negative ROI. But if they make five $50 purchases over the next 10 years, that’s a very different story.

Keeping CLV in mind can also help you keep your marketing costs down. It costs businesses 10 times more to acquire a new customer than to retain an existing one, and CLV helps you focus on the entire lifetime of your customer relationships rather than just individual purchases.

If you calculate your average CLV, you have a more accurate idea of how much you can spend to acquire each customer while still achieving your ROI goals.

To calculate your CLV, you can use the following formula:

So, if a customer typically spends $100 per year and remains a customer for 10 years, and your cost per acquisition is $200, your calculations would look like this:

($100 x 10) – $200 = $800

5 tools for tracking digital marketing ROI

Most marketers use Google Analytics 4 or a similar platform to track and evaluate their digital marketing efforts. If you don’t use Google Analytics 4 (or a comparable platform), we recommend that you start to get a better understanding of the value of your campaigns.

Customer relationship management (CRM) software like Nutshell is also a handy tool to tie your marketing efforts with your sales results, giving you a full picture of your ROI.

Here’s a list of tools you can use to track your digital marketing ROI:

1. Google Analytics 4
2. RevenueCloudFX
3. HubSpot
4. Cyfe
5. Marketo

Below is a table that summarizes their use cases:

Tracking ROI with Google Analytics 4

Google Analytics 4 is one of the best free options for tracking and measuring digital marketing campaigns. However, business-to-business (B2B) organizations will need to work harder to measure ROI if sales happen offline.

If you’re not familiar with Google Analytics 4, you can use it to track:

• Traffic mediums, like organic search, social media, and paid ads
• Traffic sources, like Google, Facebook, or another website
• Pageviews
• Bounce rate
• Online conversions
• And more

Essentially, with Google Analytics 4, you can answer questions like:

• Where does our website traffic come from?
• Which pages get the most views?
• Which pages get the most conversions?
• What are the demographic characteristics of our website’s visitors?
• How do people navigate and explore our site?
• How much website traffic do we get each day, week, month, quarter, or year?

You can also use Google Analytics 4 with other tools like Google’s Looker Studio, Bing Webmaster Tools, and our digital marketing platform, RevenueCloudFX.

Looker Studio is a free reporting tool from Google that imports data from Google’s various tools and third-party tools like AdRoll, CallRail, and Bing Webmaster Tools. You can use this free platform to turn your data into visual reports that summarize your digital marketing performance.

How to use Google Analytics 4 for tracking ROI

Because Google Analytics 4 is the most popular tool for tracking digital marketing’s return on investment (and it’s free), this guide focuses on how to use Google Analytics 4 as a business-to-consumer or business-to-business organization:

1. Create key events
2. Choose an attribution model
3. Select a reporting identity
4. Add integrations
5. Use UTM parameters to track campaigns
6. Build custom collections and reports
7. Create dashboards to share strategy performance

Let’s go through each step:

1. Create key events

Key events help businesses measure the actions that matter most, like someone:

• Joining your email newsletter
• Purchasing your product online
• Completing your contact form

Use Google Tag Manager to set up event tracking.

Then, visit the Admin settings in Google Analytics 4 to mark these events as key events. You can then access key event data in the Advertising, Reports, and Explore sections of Google Analytics 4.

2. Choose an attribution model

You’ll find a few attribution models in Google Analytics 4, including:

• Data-driven, which uses machine learning to give credit to various channel touchpoints.
• Paid and organic last click, which gives credit to the last channel a user touched.
• Google paid channels last click, which gives credit to the last Google Ads touchpoint.

Your preferred attribution model will depend on your organization and typical buyer journey.

Some businesses like the data-driven model because it provides a fuller picture of the user journey. Others like the last click model because it credits a single channel, which can streamline conversations.

3. Select a reporting identity

With Google Analytics 4, businesses have access to additional options for tracking users, including:

• Device-based, which references a user’s device ID.
• Observed, which references the user’s ID and the device ID.
• Blended, which references the user’s ID, device ID, and modeled data.

User ID is valuable for businesses with online user accounts, like an ecommerce store or software provider. Companies without user ID data can still use the observed and blended reporting identity options — they just won’t provide the same value.

Note: You can switch between reporting identities without affecting your historical data.

4. Add integrations

Take advantage of Google Analytics 4’s plug-and-play integrations for:

With these integrations, measuring the performance of specific channels is easier.

5. Use UTM parameters to track campaigns

An Urchin Tracking Module (UTM) parameter is another excellent way to track your online marketing results.

UTM parameters include:

• Campaign source
• Campaign medium
• Campaign name

They appear at the end of a URL, like “https://www.example.com/?utm_source=source-name&utm_medium=medium-name&utm_campaign=campaign-name.”

Google offers a free tool for generating UTM parameters (and auto-adding them to your URL), so don’t worry about creating your UTM parameters manually.

With UTM parameters, you can track:

• User behavior
• Campaign performance
• Traffic referrals from other sites
• And more

For example, your business could use UTM parameters to track, measure, and organize the traffic that comes to your site through specific initiatives, like email marketing.

You could also track this data down to the individual email sent, which provides you with even more data and insight into your efforts.

The best part is that your UTM parameter data goes to your Google Analytics account, which helps you make Google Analytics your dedicated space for monitoring and measuring your digital marketing campaigns.

UTM parameters require time and organization because you want to ensure accurate tracking and analysis. Working with a digital marketing agency like WebFX gives you all the benefits of UTM parameters without the work.

Your dedicated account manager takes care of mapping, creating, and setting up your UTM parameters. You can then check the data in Google Analytics — or have your account manager analyze and break down the data for you.

6. Build custom collections and reports

Measuring digital marketing ROI is easier than ever in GA4.

With Google Analytics 4, businesses can create custom collections and reports for tracking, measuring, and analyzing website performance. For reference, collections contain reports, like a folder containing files.

Some report examples include:

• Tracking specific traffic sources, like email, and user behavior
• Measuring before/after performance, like for a website redesign
• Monitoring certain site sections and/or URLs, like transactional vs. informational URLs

For the best results, use custom reports to explore and analyze data. Then, use Looker Studio to summarize this data for stakeholders (Looker Studio has a built-in connector for accessing Google Analytics 4 data).

7. Create dashboards to share strategy performance

Digital marketing brings your business a lot of data, especially when you have tracking mastered.

The problem, however, is working through all that data to:

• Determine ROI
• Find opportunities for improvement
• Discover which strategies perform best

That’s why businesses use dashboards.

Digital marketing dashboards serve as a handy tool for tracking and summarizing your digital marketing performance. They compile all your data into bite-sized chunks that offer quick answers to the questions decision-makers ask most, like:

• Which channels drive the most leads, sales, or revenue
• What is the ROI of our different marketing channels?
• What is our website’s overall conversion rate?
• Which pages have the highest conversion rates?

You can often customize your dashboards, too, which can help you focus on the online marketing metrics, channels, and actions that matter most to your company.

While you can use Looker Studio to create your business’s marketing dashboards, it’s a time-intensive process to build your dashboards and organize your data. Keep in mind that if you import a significant amount of data, Looker Studio can become sluggish.

That’s why companies will generally invest in a marketing platform that includes reporting dashboards, like RevenueCloudFX.

RevenueCloudFX is handy because it compiles all your marketing data, from search to email to social, in one place.

In addition to a main dashboard that summarizes your efforts, this proprietary and AI-powered software also provides specific dashboards for each channel.

Dashboards make your life easier.

You can instantly show teammates and company leaders how a strategy, like content marketing or email marketing, impacts your bottom line.

How to measure digital marketing ROI for 5 strategies

With traditional marketing strategies, you pay to reach a broad audience, whether that’s the viewers of a TV show, the subscribers of a magazine, or the residents of a particular postal code.

It can be challenging to measure the effectiveness of these strategies since you can’t directly track who takes action after seeing an advertisement.

On the other hand, online marketing allows you to use tools like Google Analytics 4 and RevenueCloudFX, which let you monitor, measure, and improve nearly every aspect of your campaigns.

Let’s take a look at some high-yield Internet marketing strategies and how to measure the digital marketing ROI of each:

How to improve digital marketing ROI

Now that you know your digital marketing ROI, how can you improve it?

These tips can help your business get the most value (and best return) from online marketing:

1. Use data to inform decisions
2. Establish ROI goals
3. Avoid vanity metrics
4. Use marketing automation tools
5. Test and adjust your campaigns
6. Get professional help

Let’s go through them!

1. Use data to inform decisions

Today’s companies have access to more data — and more tools for analyzing that data — than ever before. You can use this digital marketing data to calculate your ROI and use your ROI-related data to make more informed decisions.

Get the tools you need to collect marketing data, like Google Analytics 4, and set up processes for collecting and analyzing it. Then, use that data to inform your decisions, produce better results, and improve your Internet marketing ROI.

2. Establish ROI goals

If you want to improve your online marketing ROI, it’s helpful to set well-defined goals. Establishing goals gives you something to aim for, helping to guide your efforts. When setting goals, make them SMART goals to increase your chances of success.

SMART goals are:

• Specific: Make your goals as descriptive as possible. For example, instead of setting a goal like “increase ROI,” set a more specific goal to “increase ROI by 50%.”
• Measurable: Set up a process for measuring your progress toward your goals.
• Achievable: While your goals can be ambitious, make sure you can realistically achieve them.
• Relevant: Make sure your ROI goals are relevant to your broader business objectives.
• Time-bound: Set a time limit to provide motivation and accountability for achieving your goals.

Also, keep in mind that ROI goals vary from business to business. Goals differ based on your past ROI performance, your costs, and other factors. If you’re partnering with a digital marketing agency, they can help you create realistic goals.

3. Avoid vanity metrics

It’s important to stay away from vanity metrics that don’t correlate to numbers that matter. While vanity metrics make your marketing efforts look good, they don’t contribute to your actual website objectives.

Some common examples of vanity metrics include things like:

• Site visitors
• Subscribers
• Social media followers

Instead, focus your attention on engagement metrics that relate to ROI, tell you what content drives results, and reveal growth opportunities.

Engagement metrics include things like:

• Repeat page views
• Conversion rate
• Comments per post

4. Use marketing automation tools

Marketing automation tools can help you accomplish more with less, reducing your costs and increasing your digital marketing ROI. Consider investing in marketing automation tools and services.

They help with:

• Completing repetitive tasks
• Organizing your data
• Repurposing your data, like using organic user data to power remarketing campaigns
• Segmenting your audience
• And more

Email automation tools like EmailMarketingFX, for instance, allow you to set up email marketing campaigns that automatically send emails to prospects at certain time intervals or send an email when a user completes a certain action on your site.

These same tools can help you segment your email subscriber list and track the results of your email campaigns.

5. Test and adjust your campaigns

Digital marketing offers many opportunities for testing aspects of your campaigns and then using your findings to improve them. You can test nearly every aspect of a campaign, from your copy to your page design to your targeting to the channels you use.

A/B testing is one of the most useful testing methods available.

This approach involves creating two versions of an ad, landing page, or other campaign element. You then show the different versions to two groups of users and track performance to see which version works best.

You then keep the winning version and test another element of your campaign. With this approach, you can continually improve your campaigns and get better ROI over time.

6.  Get professional help

Digital marketing encompasses multiple channels, each with specific tactics. Becoming a master of them all requires a significant amount of time — and even then, most marketers don’t have the time to manage each channel successfully.

So, if you’re not seeing the ROI expected from digital marketing, consider getting professional help.

Seasoned agencies (like WebFX) can provide the resources needed to turn a campaign around, like:

• Strategy- and industry-specific experts
• Software for tracking offline and online marketing performance
• Support from representatives at Google Ads, Meta Advertising, and other companies

While outsourcing digital marketing pricing may cost several thousand dollars per month, it’s often more cost-effective than establishing and maintaining an internal team. Not to mention, experienced agencies can frequently deliver a higher ROI due to their experience, talent, and technology.

FAQs

Now that we’ve covered how to measure and grow your ROI, you may have some follow-up questions. Let’s answer them below!

Improve your Internet marketing ROI with WebFX

With more than $10 billion generated in revenue for clients, WebFX is a trusted partner for brands looking to improve their digital marketing ROI. From our award-winning team to industry-leading technology, we provide everything organizations need to grow their revenue from the web.

Let’s work together to improve your ROI. Call us at 888-601-5359 or contact us online to speak with a strategist about our custom digital marketing plans!