What is ROI?

Return on Investment (ROI)/Return on Costs (ROC) is a ratio of net income (in a given time) and investment. A high ROI means an investment gain. ROI is used to check the productivity of an investment or to compare between several investments. ROI establishes a relation between profits and investments.

    The Basic ROI Calculation = Return – Investment(s)/Investment(s)*100
(Or)
ROI=Amount gained – Amount Spent/Amount Spent*100

What do you mean by measuring ROI for Digital Marketing Campaigns?

Measuring ROI in Digital Marketing Campaigns is nothing but tracking the investments spent on various marketing channels for promoting a product or a business. Let us understand the simple calculation of the ROI.              

ROI = Increase in Revenue – The Cost of Marketing/Cost of Marketing

Though the calculation is simple, it has some limitations. It cannot forecast long-term ROI on the campaign, and it also cannot predict the indirect benefits of marketing, such as an increase in brand value and brand reputation, which cannot be measured.

Three common ways of measuring ROI:

1. UTM (Urchin Tracking Module) link: It tracks digital marketing campaigns on Google Analytics. When a new visitor clicks a link marked with a UTM code, Google Analytics tracks the user who clicked the UTM link and checks what campaign triggered to generate a lead.

2. Adding tracking pixels to a business website: Inserting Digital pixels into a business website can help a business track its users. It helps them to know the source from where the traffic is generated. Some examples of Digital tracking pixels are Google Analytics, Facebook Pixels, and LinkedIn Insight Tag.

3. CRM (Customer Relationship Management) Tools: CRM software can track the complete journey right from visiting a website to buying a product. Calculating ROI with the help of CRM software is not always helpful. Sometimes it misses on some minor goals of marketing strategy.

How to Improve ROI?

By setting up specific ROI goals, the goals and objectives should be different for each marketing strategy employed in marketing campaigns for a business. High-level analytics should be used for a further breakdown of your ROI.

Conversion Funnels in Measuring ROI

The conversion funnel explains from where a specific lead is generated in their buying journey.

High funnel: High funnel customers show a general interest in a subject associated with a business. These are the people whose primary interest is not to buy a product. They won’t buy unless they are very much excited to buy a product. For example, a visitor might search for a mobile phone on Amazon, but his intention is not to buy a product but to check or enquire.

Mid funnel: Mid funnel customers are those customers who show a general interest in a subject associated with a business to purchase it later when there is a possibility. They might have kept you under surveillance. For example, a customer searches for a product on a shopping site and then adds it to the cart to purchase it later.

Low funnel audience: Low funnel customers are always active and ready to purchase a product. They still have a clear intention of buying a product or a service. For example, if a customer makes a purchase instantly after searching for a product, they are called low funnel customers.