Introduction - Measuring for ROI
From the moment digital advertising entered the arena, it was obvious that it's a game changer. Finally a cost-effectiveness method in which you can actually measure the impact of every dollar spent - no more excuses.
Measuring methods have been changing constantly in order to adapt to marketers' evolving needs and understanding. At first, impressions were mostly measured, a little later on clicks following by the rate between the two.
A Campaign used to be considered successful if it generated a vast amount of impressions and clicks, regardless if what those clicks yielded.
Over the years, as technology and marketers evolved, so did measuring methods, introducing conversion tracking, enabling marketers to measure for conversions on their website. Conversion tracking was mainly used for lead acquisition tracking, and all the industry aligned accordingly. Affiliate and ad-networks started offering CPL (Cost per Lead) models instead of CPM or CPC (cost per impression/click) models. Campaigns were considered successful in accordance with the amount of leads they were generating and the cost per lead per each campaign.
Marketers soon identified the opportunity and realized that precise measurments provide them with much better insight then before, so why not drill down deeper?
Technology and marketers kept evolving and by now it is possible to measure the direct revenue and ROI driven by your digital marketing campaigns.
However, with more data = greater measuring and reporting complexity. In this post I'll explain how to find the optimal report you need to generating without drowning in an ocean of data.
Let's discuss KPIs
The key performance indicator (KPI) quickly became a buzzword in the digital marketing industry, because it streamlines the decision making process for choosing what should be paid attention to the most, more so than other data that could be studied, to reflect whether or not a campaign is working and achieving its goals.
In other words, just because data can be measured does not mean that it needs to be reported in order to find out if an online campaign is returning on the company’s investment. The key word in KPI is ‘key’.
The KPIs you should measure depend on your budget, industry, business type and goals.
The number of possible variables to measure in digital marketing is enough to make a person’s head spin. That being said, once you have identified which variables are truly your key performance indicators, the hard part is over (besides tech requirements). The following is an example of a list of some of the most commonly used KPIs for digital marketing purposes (paid advertising):
- Impressions / CPM
- Clicks / CPC
- Conversions / Conversion Rate
- Lead / Cost Per Lead (CPL)
- Purchase / Cost Per Action (CPA)
Each of the above inform marketers of whether or not their efforts are worth the time and money you are paying them.
As mentioned, there are many ways to evaluate the efficiency of marketing efforts, but each marketing campaign is unique and demands specific KPI to optimize for – that KPI should be the main focus of the report.
If your company is a clothing brand, an expanding geographic reach is a great KPI to measure your ROI. If you are a cloud SaaS company, it would not be as valuable to focus on geographic reach as much as it would to measure contacts created, MQLs, SQLs, ARPU, etc.
To put it simply, in the case above there is no reason for the SaaS company to set geographic reach as a KPI, while there certainly is for a clothing brand. Pay attention to KPIs that only reflect you and your company’s marketing goals. Otherwise, it is a waste of time and money, of which it should be safe to assume none of us are big fans.
While brand awareness KPIs like the above example are sometimes very useful, they are the more “old-school” means to understand marketing efficiency. After all, what does it matter if people know about a brand but aren't buying from it? In digital marketing, the savviest marketers will measure KPIs that demonstrate how well the number of visitors are converted into leads and how well leads are converted into your customers. This is how you get to understand ROI.
That being said, brand awareness has significant impact on your digital marketing efforts. Good brand awareness will increase CTRs, Conversion rates, CPLs and eventually ROI (It is very difficult to measure the EXACT impact of brand awareness unless a conversion lift research is being performed).
The necessity of client-specific KPIs
The purpose of digital marketing reporting is not exclusively for informing you of whether or not the marketing efforts are yielding positive ROI. Reporting should to keep you informed of your campaign strategy’s effectiveness. This point is important, because a company’s industry dictates the KPI’s that prove meaningful to measure. Nearly every single enterprise, startup, or “Mom and Pop” shop has an online presence, but different industries demand specific KPIs be measured to determine marketing success.
Different businesses have different goals and challenges. Accordingly, measurments vary to reflect different digital marketing efforts. All businesses should attempt to measure for ROI. Sometimes the diversity of marketing channels (omni/multi channel advertising) poses a great technological challange when attempting to measure the exact ROI per each channel and how much to attribute to each channel.
Here are two examples of this complexity:
- SaaS Company - these companies produce software as a service solutions and rely on online users to pay in order to use their software. Typically, saas products (especially the costly ones) require a long sales cycle and sometimes entail micro-conversion along the way. Measuring micro-conversions could assist in understanding what marketing action performs better. For exampl, the amount and cost per MQLs/SQLs or opportunities generated by a specific channel could tell a much better story than focusing only on the amount of impressions or clicks.
- Large retailers without an online store – these businesses can’t easily measure (if at all) the effectiveness of their online marketing. A typical campaign for such retailers is a brand awareness campaign. In such instance, social sharing, brand mentioning, impressions or average monthly searches are good metrics for measuring marketing efforts.
In both examples, we would want to track the cost per click or impressions, the CTRs and conversion rates in order to better optimize the campaigns. Reporting wise, we would want to asses the main impact of each campaign and what can be done in order to improve it.
Monthly reports are a marketing status quo. A report can be done each quarter, once a year, once a week or whatever you decide. Make sure your reports are result driven, define relevant KPIs that are specific for your business and make sure you are measuring for ROI.
If you found this useful, I invite you to download our Digital Marketing MUST Reports and Measures eBook. This is your guide to start measuring what truly matters in your campaigns and take control of your spend. Get your FREE copy now >>