How to Track the ROI on Your Growth Marketing Campaign
The Next&Co Digital Media Wastage Report shows that 41% of the average company's marketing budget is wasted, with wastage being the highest among ecommerce, retail, and finance companies.
Calculating your Return On Investment (ROI) is perhaps the most important thing you can do to keep your growth marketing spending on track. Knowing your ROI will help you:
- Make value-conscious choices
- Prove the value of your marketing to leadership
- Justify your marketing budget for next year
- Choose which marketing channels to invest in
This article will show you how to calculate your growth marketing ROI step-by-step.
Step #1. Set Up Ways To Track Your Marketing Success
You can't calculate marketing ROI without knowing what "return" you are getting. So the first step is to set up ways to track your marketing successes.
Common ways to monitor your digital marketing campaigns include:
- Google Search Console. Google Search Console helps you monitor your website's performance in search results.
- UTM links. You can use UTM codes to track how your website visitors browse on Google Analytics.
- Facebook Pixel. Facebook Pixel will help you track conversions from Facebook ads.
- Social media marketing analytics platforms. Platforms like Buffer Analyze, Sprout Social, Hootsuite, and Zoho Social can help you analyze your social media marketing Key Performance Indicators (KPIs).
- Ecommerce analytics tools. Platforms like Hotjar, Kissmetrics, and Optimizely can help you analyze ecommerce KPIs.
- Customer Relationship Management (CRM) tools. CRM tools like HubSpot, Salesforce CRM, SAP CRM, and ZOHO CRM can help you analyze customer interactions.
It's best to set up these tools before you start publishing your marketing efforts.
Step #2. Gather Data
Next, sit back and start gathering data. It's best to monitor your marketing for several weeks or months if possible, as a longer data collection period will ensure your results aren't skewed by outliers.
Step #3. Calculate Your Marketing Costs
Then, calculate your costs.
You'll need to take two types of costs into account:
- Direct costs
Direct costs are expenses that have a clear price tag and can be directly tied to your marketing and sales funnel. Marketing software, Paid-Per-Click (PPC) ad spending, equipment, marketing staff salaries, and freelancers are all direct costs.
- Indirect costs
Indirect costs are expenses that aren't directly tied to your marketing but are still essential to make running the marketing department possible. Rent, electricity, and salaries from non-marketing staff (like receptionists or administrators) are all indirect costs.
You may need to consult your accounting department to figure out your indirect costs. Once you have your figure, add it to your direct cost figure to get your total marketing spend.
Step #4. Calculate Your Marking Returns
Now it's time to calculate your marketing returns, and there are several approaches you could take here.
If you want to simplify things, you could take your entire net income figure for a given period and attribute 100% of it to marketing.
Or, if you want to be more precise, you can go through your marketing channels one-by-one and calculate how much revenue your company earned as a result of it. This is easier with some channels than others. Some ad analytics, paid media, and referral marketing tools, for example, will help you calculate how much revenue your brand earned from ads. Sales from social media marketing and content marketing, on the other hand, are harder to attribute.
Whatever method you choose, you should finish this stage with a clear figure.
Step #5. Execute the ROI Formula
The final step in measuring digital marketing ROI is executing the following ROI formula:
ROI = (marketing revenue - cost of marketing) / cost of marketing
For example, if your total revenue figure was $45,400 and your total marketing costs were $12,300, your ROI would be 2.69.
If your ROI figure doesn't look right, make sure you have only included marketing returns and costs from a single, clearly defined period (like quarter one or 2022, for example). A common mistake marketers make is including a year's worth of an expense rather than just the cost in a set period.
Other KPIs to Watch with Growth Marketing
- Customer Lifetime Value (CLV) = average order value x purchase frequency rate x average customer lifetime
- Customer Acquisition Cost (CAC) = (cost of sales - cost of marketing) / number of new customers acquired
- Conversion rate = (total conversions / total visitors) x 100
- Cost-Per-Click (CPC) = total amount spent / total clicks
- Open Rate = (number of emails opened / number of messages sent) x 100
- Average Transaction Value (ALV) = total sales / number of transactions
Tracking other KPIs and presenting them alongside your marketing ROI can give the ROI figure more context. It can also help you explain fluctuations in your ROI across multiple periods.
Calculating Marketing ROI, Growth Marketing, and Matter Made
Measuring marketing ROI will help you quantify your growth marketing efforts, build a strong PLG funnel, and analyze your digital marketing campaign efficiently. Naturally, knowing your marketing ROI can help your growth marketing strategy succeed long-term.
Want to embrace growth marketing but don't know where to start? Let's talk.