How to calculate ROI in digital marketing

Alex Minchin
Alex Minchin

2019 is set to become an exciting year for digital, and if you believed everything you’ve read you would need a few million pounds of budget just to be involved. This is, of course, possible for household names with deep pockets and a large R&D budget to spank.

The race for brand recognition via voice search on assistants such as Amazon Alexa and Google Home is a real one. Automation and personalisation for those brands generating hundreds of leads per week is also true. And AI is important for those businesses seeking to get an early foot in the door on the world stage.

But what if you’re a business that has a digital marketing budget of £100,000 per annum or less? Do you really need to gamble on AI? Are you generating the volumes that truly require automation? Or is your digital marketing strategy better off being simple and highly focused?

How to calculate ROI in digital marketing

Our Growth Calculator will literally tell you the answers that you need. We’ve created this free digital marketing ROI calculator to uncover the real revenue growth potential of your marketing. The only metrics to measure that remain constant in this game are traffic and conversions.

Don’t just take my word for it. Perhaps the most well respected digital marketer in the world, Ryan Deiss, of Digital Marketer preaches this too. He even runs an annual conference each year just dedicated to these two metrics.

Top takeaways from Traffic and Conversion Summit 2018

Setting a clear objective is the first stage in marketing success. Watch our video on planning your revenue growth goals if you need some help with this.

The digital marketing strategy ‘sizzle’

Sell the sizzle they say. But what if the sizzle isn’t actually delivering a return on your marketing budget? Is it still worth the whiff of what-could-be? In poker, they call this being pot-committed – where a player is so heavily invested in a hand that they risk it all in a moment of madness, only to often lose to the smarter player who was reeling them in all the while.

So for the purposes of this post, I wanted to define the ‘sizzle’ as any marketing activities that does not have a meaningful measurable result at the end of it. For businesses with smaller budgets, realising a return on investment is key.

With this in mind, the focus must be on revenue generated. Profitability isn’t really a marketer’s job. That’s down to the business, it’s pricing strategy, positioning within the marketplace, customer service, and various other factors outside of the control of a digital marketing agency.

Do not be sold short on sizzle. The question has to be asked: if we achieve X, what will the tangible (monetary) benefit be for my business?

If whoever is doing your marketing cannot answer this question (so long as they have the necessary data), you are buying into sizzle.

The digital marketing strategy ‘sausage’

So what is the ‘sausage’ exactly? In this post I want to define it as being the very core principles that make your business more leads and more money – simple. The results are clear, transparent, and translate very clearly into pounds and pence. No it’s not going to get you featured on Alexa, but it will drive results.

The core metrics that you should be concerned about when it comes to your digital marketing strategy at lower budgets should be focused and easy to quantify. Complex layering of metrics such as cross-channel attribution should be reserved for those who have the budget and resources for the job, to avoid diluting your true needs.

Research

Understanding how you’re going to achieve your objective is pretty important, and requires research. This is valuable time that needs to give you a starting point. Even if you’ve never marketed before and have little or no historical data to pull from, there is enough out there to give you the research required to take a calculated risk.

Use free tools such as Google Trends, Keyword Planner, Answer The Public, YouGov, and your competitors’ websites as a starting point.

Traffic and conversions

Driving quality traffic to impactful landing pages, with a clear call to action, is as simple as it gets. If you have an annual digital marketing budget of £100,000 or less, this should (in most cases) form your strategy. You will want to split this budget into two key areas:

  • Traffic Acquisition – driving increased volume and quality traffic to your website
  • Conversion Optimisation – ensuring that those visitors convert into opportunities

Focusing on making people aware of your business, what it does, and how it helps them, is perhaps the most fundamental part of marketing. Driving this awareness to owned media (your website, for example) will enable you to further engage them.

Focusing on channels that excel in this area is extremely important, whether that’s through SEO, PPC, or other. Whatever channel you use, make sure that you have a focused objective to work towards, and that it’s being measured over time. Concentrate your efforts by allocating plenty of budget to these channels. You’ll soon know if they’re working or not, and you can make future decisions easier. Diluting across too many channels will yield slower action and will provide inconclusive results and frustration.

Strategy

The next step is to layer some guiding principles that you’ll follow to maintain your focus. This might be a location, audience, product or service, or similar set of definitive ‘tick boxes’. If what you’re doing does not follow your strategy, then question if it’s really part of your plan.

Without getting into the detail of how to create a strategy, the core things that should be considered include (but aren’t limited to);

  • Audience – who is your marketing aimed at? What are their pain points? What challenges do they have? What are their goals? How does your product or service meet their need?
  • Device/channel –  where is your audience hanging out? Where are they likely to look for a solution? Are they on the go? Is it at the weekend together with their partner?
  • Product/service – what specific products or services are you focused on marketing? Again, avoid diluting across everything. You don’t need to shout about everything if your budget doesn’t allow for it.
  • Geographic – where in the world are you targeting? The world? Do you really have the budget to reach the entire world? What about the UK? What about just your region?

Ensuring that your strategy is simple enough to grasp in one glance will help you to stick to it. Pages and pages of ‘strategy’ is not a good thing. If you can’t succinctly communicate your strategy, it’s not good enough. Worse, it probably won’t be followed.

Key Results

Taking your objective and breaking it down into smaller milestones or mini-objectives will make your life a lot easier. Start by working backwards from your objective to identify what you need to do first. If this is difficult, try to divide the goal by two, then two again to get yourself started.

For example if your goal is to generate 100 leads, split this down into two. How will you achieve the first 50? Divide by two again. How will you achieve 25 leads? And so forth until you have a set of manageable goals that together make up the objective.

Activities

Lastly, the activities or actions that you need to complete on a day-to-day basis. Each should have purpose aimed at moving you closer towards your key result and objective, otherwise the value of that activity should be questioned.

How does a mouse eat an elephant? One bite at a time.

By assigning activities to key results, or smaller goals, they are likely to be more focused and meaningful since you’re working within a confined and definitive set of requirements. Trying to task out against a much bigger goal often results in a broad brush approach that can be unclear.

For example think about buying a house. The objective is to buy the house. Tasking something like this out is likely to look something like this:

  1. Establish a budget
  2. Find a house
  3. Obtain a mortgage
  4. Agree a price for the house
  5. Exchange contracts
  6. Complete purchase
  7. Move in

A sensible list? Yes. A broad brush list? Yes. Now consider if each of those steps was a key result. Let’s take ‘Obtain a mortgage’ as an example. Our task list might look something like:

  1. Compile a list of potential lenders
  2. Enquire with all lenders to understand available mortgage offers
  3. Select the best lender for my needs
  4. Obtain mortgage in principle
  5. Submit all required documents
  6. Obtain official mortgage offer

As you can see, just the fact that we’ve zero’d in on a specific part of the overall objective means that we have a much clearer set of activities to now follow. If we complete those actions, we should end up with a mortgage offer. If we end up with a mortgage offer, we’ll be one step closer to our objective of buying a new house.

Here are some other questions that people are asking when it comes to figuring out digital marketing ROI:

How do you calculate ROI in digital marketing?

This simply comes down to revenue and, sadly, many agencies avoid this truth. Traffic x Conversion Rate % = Number of conversions. If you have a further step such as a proposal requirement, then multiply this figure again by your Conversion Rate % (Lead to Sale). Then multiply this figure by your Average Order Value, and you will have a very quick calculation of ROI.

How do you measure digital marketing?

There are many metrics that can be measured. It’s important to determine if you need leading (forecasting the future) or lagging (telling you what happened) indicators. Stick to metrics that will give you the best indication of how you are progressing against your objectives. This might be traffic growth from [channel], or revenue per visit for an overall value of your efforts.

How can ROI be improved in digital marketing?

We believe that there are only, really, two things that are important to growing ROI through digital channels; traffic and conversions. If you build quality traffic and convert it at a high rate, the outcome is almost certainly going to be an increase in ROI.

How do you optimise ROI?

ROI is optimised by focusing on the indicators around each product or service. Build quality traffic that grows in volume, and continually optimise landing pages to deliver on the user’s wants and needs. This way you optimise the outcomes and grow return on investment.

How to calculate ROI in digital marketing

I hope this post has given you food for thought as to how a business with a digital marketing budget of £100,000 or less can concentrate efforts to provide a much more likely return on investment. There are some clear things that you now need to go away and do:

  1. Work out your current position
  2. Use our Growth Calculator to forecast your desired ROI and objectives required
  3. Create a simple strategy to follow
  4. Break down your objective into key results
  5. Ensure your day-to-day activities are definite and purposeful
  6. Execute and measure

If you complete the right activities, you’ll complete your key results. Complete your key results following your strategy, and you’ll achieve your objective. Achieve your objective, and you’ll realise your ROI.

And if you require specialist help along the way, and like our methodology, then please get in touch with our Partnerships Team and we can discuss your objectives together.

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