ROI, or return on investment, is a common metric that marketers think about when measuring the success of their marketing campaigns. It basically calculates how much profit you get for each dollar invested in your marketing strategy.
According to HubSpot’s 2021 State of Marketing Report, 4 in 10 marketers feel that it’s “extremely important” or “very important” to understand the ROI of marketing campaigns, However, only 37% feel “very confident” when making budget decisions for investing in campaigns that influence revenue.
By calculating the ROI, marketers have accurate data that proves how much revenue can be attributed to their campaigns. This data is gold when it comes to reporting, making future marketing decisions, and showing the real value of a successful marketing campaign. Knowing this data has been a game changer for us here at ALYKA.
Are you effectively measuring your ROI? Complete our complimentary digital maturity index to see how you’re performing in the digital landscape (limit to 7 per month).
Difference Between ROI and ROAS
While they may seem similar, return on investment (ROI) and return on ad spend (ROAS) are actually not. ROI is the profit over the total cost of your marketing campaign. This cost includes the advertising spend, software, design, people cost and everything else that goes into the campaign.
The formula for ROI is simple: (net profit / net spend) x 100%
ROAS is the revenue made from your ads over the amount spent directly on ads, excluding other costs. ROAS can tell you if your advertising campaign is bringing in revenue, but it doesn’t show exactly how profitable your ads are.
Here is the formula for ROAS: (revenue from ads / advertising spend) x 100%
For the rest of the article, we’ll talk about ROI, as that is the most accurate measurement of how much revenue your marketing has brought in, compared to the full cost to the business.
What Should You Consider when Calculating ROI?
Calculating ROI for your marketing campaigns can be tricky especially if you’re measuring the effectiveness of content marketing strategies like blogs, emails and video campaigns. Below are factors you should keep in mind when determining the ROI of your strategy.
Time: The time you put into the strategy including creating the marketing materials, strategising and setting up the campaigns.
Total Production Costs: The total cost needed to create the campaign. This includes the cost of the ads, services, supplies, software and salaries.
Financial Profit: The financial profit is one of the main things to consider when determining your ROI. This refers to the net profit after deducting your costs.
Non-Financial Returns: In some cases, your campaigns might focus on non-financial objectives such as brand awareness, engagement, web traffic or educational impact. These could help your business and brand stay connected with your audience and eventually bring in more revenue in the long run. HubSpot offers a great way to include these metrics into your ROI reporting, as it attributes metrics such as page views and social media engagements to conversions.
Page Analytics: Use a tracking URL to connect your page to an analytics tool such as Google analytics. This way, you can track the traffic to your landing page and number of sales generated.
Tools to Measure ROI
In digital marketing, the success of a campaign isn’t only measured in sales or revenue but also leads, engagement, media hits, and more. You also have various channels to keep track of from PPC to email marketing which can be easy to overlook. Fortunately, there are a lot of tools to help you track and measure your ROI even if you have a lot of data to look at.
Google Analytics is a great free tool that gives you insights into your web traffic, traffic sources and other metrics such as bounce rates, website conversion and even ecommerce performance. Integrating it with Google Ads further allows you to measure your PPC campaigns’ performance.
More than 60% of marketers use a built-in marketing or CRM software reporting tool. A CRM such as HubSpot can do what Google Analytics does and more. It allows you to track a wide range of data such as lead information, revenue, data from different campaigns and even give you control over your customer journeys. We’re HubSpot Diamond Solutions Partners here at ALYKA, and can say that the reporting functionality that HubSpot offers is second to none!
While there are many advanced tools available on the market, a spreadsheet is still a great tool to keep track of your campaign performance. A simple Google Sheet or Microsoft Excel spreadsheet can go a long way in keeping track of your ROI on a more frequent basis, as long as you update the data in a timely manner. Because you can easily use formulas in a spreadsheet, you can keep track of multiple metrics at once on top of your ROI.
Some tools available on the market may not offer hard data on your ROI, but they can offer valuable estimates on your social media metrics, email marketing and others that can be taken into consideration as part of your ROI calculations. These tools include BuzzSumo, HootSuite, MailChimp, Cyfe, and the like.
A good report on ROI needs good data, and an understanding of what data is important. Not sure if you’re collecting the right data? Complete our complimentary digital maturity index to see how you’re performing in the digital landscape.