As a business owner, you understand the concept that to make a profit, you need to make more money than what you spend. When you choose to invest money in a product or service, you hope to see a return on investment (ROI). While some things are easy to measure, such as the cost to produce an item versus the selling price, other investments may not be so straightforward. We realize that the money you spend on your digital marketing may be difficult to part with, primarily because understanding the return on investment is not so clearly defined. Over the next several weeks, we will be presenting a series of articles covering the different aspects of digital marketing, and how to better measure those aspects in terms of your ROI.
For this first installment, we will be discussing the measurement of your digital marketing ROI overall. Future posts will cover topics including social marketing, email marketing, website design, and several others. Our hope is that these articles will be helpful to better understand the value of digital marketing, and how you can easily measure the impact your efforts are having.
Measuring Your Digital Marketing ROI
There is a terrific quote by department store merchant John Wanamaker stating. “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” Though this quote is from the late 1800’s, it can still ring true today in our digital age. Fortunately, measuring digital marketing ROI is becoming increasingly easier, making it possible for business owners to better understand their investment and ensure that they are getting their money’s worth. However, there are differing schools of thought on the way in which measuring digital marketing ROI is done most efficiently. Each type of measurement comes with its own advantages and levels of accuracy. We will look at some of the most commonly used methods, and give an overview of what information they are or are not able to provide.
Challenges of Measurement
In theory, measuring your ROI for digital marketing should be relatively straightforward. Just consider the amount invested in a campaign, examine the sales numbers and profit margins, and divide it by the investment amount. In reality, there are certain aspects that make this difficult. The first is time, and the second is unpredicted events that influence the profit numbers. The first method to help overcome these challenges used test campaigns. In this process, you run two marketing campaigns using the same medium with slightly different content, messages, and other marketing strategies. By examining the numbers for both, it is easier to determine which method was more successful for future marketing investments. However, this A/B testing process can be costly and time consuming. While tests may be an excellent option, it is not likely a method that you will often use. It can be very helpful when beginning you digital marketing strategy, or when you notice a slump in its effectiveness.
An Alternate Method
Time adds another challenge because long-term marketing campaigns can be difficult to measure. The reason is that if a campaign gains you a customer, subsequent purchases may be a result of the marketing. However, these additional sales are not easily measured. The cumulative nature of long term digital marketing creates probabilities that are prohibitive to accurate measurement. That is why the method of measuring program to program cost savings is often used. This method looks at the number of impressions against the expense of a particular method of digital marketing over another. By examining these cost per view numbers, one can detect where their digital marketing dollar is best spent. The negative aspect of this is that it does not take into account how many of those impressions led to sales. The real value of each impression is lost.
Consider the Intangibles
There are other excellent options for measuring digital marketing ROI being developed and released. For example, Google has tools for this process which will be covered more in-depth in a future article. These new methods of measurement allow a more robust understanding of how one’s money is working for them. The possibility of measuring conversions and sales, instead of only impressions makes the calculation of ROI much easier. However, there are always the intangible benefits that must be considered which you cannot adequately measure. This would include things such as an improved brand image or the customer’s perceived notion of your expertise in your field. These intangible digital marketing benefits are certainly felt as your strategy continues over time. What is problematic is that though you will experience these sorts of benefits, they are not so easy to place a value on for calculation.
It is critical that as a company you are aware of your digital marketing ROI. Working closely with a digital marketing firm, who will take the time to educate you, and will provide the information needed to successfully determine ROI in the best possible manner is an excellent option. Moreover, though you can find that information about what your campaign is doing in terms of tangible numbers, you must also consider the benefits that come which cannot be.
At Cohlab, we fully understand the importance of knowing your digital marketing ROI. That is why we do take the time to ensure you understand both the tangible and intangible results of your digital marketing efforts. We “cohlaborate” with you on proving out your marketing ROI, and our strategy has been greatly successful for digital marketing clients. Use our complimentary Digital Marketing Scorecard to gain valuable insight on how your website rank compares to others. Our team would love to speak with you and answer any questions you may have. Our mission is to provide you with Cohlaborative digital marketing solutions to meet your organization’s needs.