How to measure return on investment (ROI)

DIGITAL MARKETING is easy to measure, but it is also hard to measure. Do you know which marketing channel is the most successful? How do you know, when each provides a different value?

Introduction

When you invest in digital marketing you are obviously looking for some kind of business gain, but what specifics will you measure in order to know you are achieving that gain?

• Enquiries?
• Subscriptions?
• Traffic?
• Brand mentions and links?
• Positive sentiment?
• Press coverage?
• Sales?
• Customer lifetime value?

In order to measure something, you need to know what you are measuring and compare like for like. Take sales, for example. Your website may sell £15,000 worth of products one month and £20,000 worth the next, but how do you find out the reason for that 33% uplift? It could be that you sent out an email offer, or demand for your products in search may have increased.

Did the sales come from people who were first-time visitors to your site or people who had visited before, perhaps several times through multiple sources?

An understanding of traffic sources in Analytics is an important requirement in measuring ROI. Breaking down traffic by source, by device, geography and other factors helps you drill down into your conversion metrics to work out why those numbers occur, in a way that you can compare changes over time.

Let’s compare traffic sources in Analytics

Breaking down traffic by source, by device, by geography and other factors helps you drill down into your conversion metrics to work out why those numbers occur, in a way that you can compare changes over time.

Google Analytics allows us to compare website traffic sources in an extremely granular way. The four main traffic sources are explained below:

Organic: Traffic that comes from a non-paid search result (primarily on Google or Bing).

CPC: Cost per click, otherwise known as pay per click (PPC). This is traffic gleaned from paid search results, usually Google Adwords.

Referrals: Traffic that comes from a link on another website, but not a link resulting from a search on a known search engine. Referrals also include social media referrals.

Direct: Traffic where the source cannot be determined, or where the user has accessed the website direct.

If you examine the four traffic sources individually in Google Analytics, you will see differences in performance – as shown in the example below.

Now, when it comes to evaluating return on investment, you can begin to see the crude differences between, for example, SEO and PPC. You can also look at referral traffic from social networks, broken down by network and landing pages, allowing you to see which social network is sending you the best traffic.

Now, pay attention to that word “best” because it doesn’t mean “most”. The source of your highest traffic may not necessarily be the source of your best-performing traffic.

Let’s break the traffic down further

Not only does traffic come from different sources, but it also comes via multiple devices.

A high percentage of web visitors now use mobile phones and tablets instead of desktop computers, and you can see wildly differing metrics when you break down the traffic by device.

For example, the table below shows the performance of a website’s traffic broken down by device.

Let’s break it down even further and show the traffic by both source and device – this lets us see where we get the most engagement and conversions.

Don’t fall into the trap of last click attribution

So, you have broken down your traffic so that you can now see which source and which device generates the most conversions. You could, if you like, simply measure the cost of each activity against the value of the conversions.

When anyone invests in a marketing channel, be it search, radio, television or any other form, one key requirement is measurement of ROI. The lure is often to focus on a single metric in isolation and this is a mistake. Lee Wilson

With Google Analytics, you can measure engagement and conversions from PPC, SEO, email marketing, content marketing and other forms of promotion. However, assuming each conversion results only from the last action is a big mistake.

Another key piece of functionality within Google Analytics is Assisted Conversions, as well as the Top Conversion Paths feature. The latter shows us how a conversion can happen as a result of several visits across different sources. This is shown in the graph below.

This graphic demonstrates that several conversions happened as a result of an organic search or a referral, but the user had previously visited the site as a result of a PPC click. This type of user journey is common. Consider this example:

A user searches Google for “red widgets” and they see your advertisement at the top of the page. They click on your ad to visit your website, but they leave without buying anything. Later, they are still shopping around and they remember your company name, so they search for “red widgets brand name” and they see your organic result and click on that instead of the advert. On that second session, they purchase your red widgets.

You might give credit for that sale to SEO, but it happened as a result of your PPC advert.

Herein lies the problem for any marketer trying to measure ROI.

The best thing you can do to start with is set up your Analytics program to track as much of the user journey as possible – right through to conversion. For more information, read our guide: How to track your leads using Google Analytics

Quick tips for tracking sales in Google Analytics

Commonly, we track things like sales or enquiries in Analytics, but there are things to consider.

• Telephone tracking: Sales can come from people calling your phone number. You can track these using call tracking software, linking the call back to a specific visit.
• Campaign codes for emails: When you send emails with links, those links will show up as direct traffic, usually. Adding campaign codes to URLs help you to track visits back to source, enabling you to evaluate the success of different campaigns.
• Goal funnels: When users complete forms or go through a multi-step process to complete an action, you could set up a funnel, keeping track of the whole journey. This enables you to see where they drop off, if they don’t get through to the end.
• Micro and macro events: You can set up trackers to record specific activity such as playing a video or when someone carries out a particular action, like clicking a sharing button.

Measuring ROI in line with objectives

To accurately measure the success of something, you have to place it into the context of the original objectives.

What are you trying to achieve with your marketing? It’s probably fair to say it’s all about gaining more customers and growing sales – that’s pretty obvious.

You could, if you wish, keep it extremely simple by comparing your whole marketing budget with your aggregate return – not worrying about audience demographics, devices, traffic sources or anything else. If you make more money back than you spend, isn’t that great?

Of course it isn’t, because we need to always examine whether we can do better. Why be happy with a 100% return on investment when we might be able to cut costs and tweak tactics to achieve a 200% gain? Only by examining the metrics are we able to find where these gains can be made, but the reason for all the preamble above about sources and last click attribution is to explain the danger of being too literal about judging each channel independently of the others.

Lee Wilson, Service Manager for SEO (full service), says, “When anyone invests in a marketing channel, be it search, radio, television or any other form, one key requirement is measurement of ROI. The lure is often to focus on a single metric in isolation and this is a mistake.”

Below, we detail a dual approach to measuring the effectiveness of your digital marketing. First, though, let’s think about objectives. More customers and higher sales may be your ultimate business goal, but marketing needs to be focused.

Lee continues, “How would you attribute the returns? First click? Last click? Any click? Other things to consider include assisted sales, as well as the lifetime value of a new customer, and the interaction between marketing channels for collective gains.

“To accurately measure the success of something, you have to place it into the context of the original objectives.”

ROI is about more than sales

If you buy a vacuum cleaner from a shop, your ROI is clean carpets. You wouldn’t purchase it to increase the resale value of your house.

Consider a professional shop window dresser – employed by top retailers to dress windows with the aim of attracting customers into shops. The window dresser has no idea how many sales happen as a result of the dressed windows. The retailer pays based on faith and experience.

Similarly, a PR professional’s work does not result in direct sales. Their job is to achieve press coverage for clients. The ROI is not measured in sales but in column inches. The PR agent calculates the value of the coverage in magazines and newspapers by comparing ad rates in those publications.

The press coverage is valued according to how much the space would cost in advertising, and this value is measured against the PR spend to calculate ROI. That may seem old fashioned and odd, but it’s an easy to understand metric.

Likewise, SEO activity doesn’t always lead to sales straight away – achieving higher rankings today may lead to sales in six months, when your industry is in its peak season. The work you do each week on your social media channels may seem like it’s not bringing you any financial return, but there are so many intangible benefits to a social presence and ongoing interactions with influencers and customers.

Social Media Marketing Service Manager Alex Robertson says, “If you buy a vacuum cleaner from a shop, your ROI is clean carpets. You wouldn’t purchase it to increase the resale value of your house. The same analogy should be applied to social media adoption.

“If your objective is to increase your overall brand awareness via social channels, the ROI is achieving the metrics supporting that, be it increased social reach, a higher level of unique engagements or an increased level of traffic from social sources to your website – not necessarily growth in immediate sales.”

Seek constant refinement with PPC campaigns

PPC is one marketing channel whose ROI is financial. You spend X to make people click through to your website, you need to see a good return on that spend. Ignoring, for a moment, whether last click attribution is a good or bad thing, there are ways to measure the effectiveness of your PPC spend.

“Primarily, it is about constant refinement,” says PPC Service Manager James Faulkner. “You can’t just set up a load of ads and choose keywords and place a bid limit and then let it run. A number of factors dictate whether you are running a cost effective campaign.”

The Vertical Leap PPC team saves clients money by identifying and investing in effective campaigns. They do this by refining demographic targeting, reducing wasted bids on words that don’t convert, improving landing pages and generally boosting quality scores.

• Quality scores: The combination of each advert on Google AdWords, its target keyword and the website’s landing page you are promoting results in a unique quality score. The higher the quality score, the less you are likely to pay for high-ranking advertisements.
• Assets: Call back numbers, in-ad forms, rating stars and other extensions to adverts help visibility and response rates.
• A/B testing: Testing on a continual basis is important to help find what works and eliminate what doesn’t.
• Refinement of targeting and negative keywords: One of the most common ways to waste money on AdWords is by bidding on useless keywords or by targeting the wrong demographic – which lowers your quality scores.
• Social media targeting: This is a whole different ball game from Google AdWords search, and it allows more diversity in your PPC budget, to help you reach different people based on a variety of triggers.
• Landing page optimisation: The page users land on is as important as the advert they see. The page needs to be optimised to make the journey through to sale as quick as possible, with minimal distractions.

James Faulkner, PPC Service Manager, says, “Every business has specific objectives, it’s important to agree objectives with your campaign manager. Agree a return on investment threshold – once a campaign is operating at a profitable level you’ll want to expand and invest more, as this will lead to greater volumes of conversion.”

Translating SEO visibility into ROI

Search engine optimisation is all about visibility. In order to generate sales organically, you need to have people on your site, and to get people to your site you need to be visible in search results.

This is the core message of the SEO service offered by Vertical Leap – organic success starts with visibility. So, a key measurement of SEO success should centre around two things:

• Your words universe: How visible is your site in search results for the many thousands of potential queries that your potential customers use?
• Your site activity: How active is your existing website? We often find that less than 20% of a website is showing any signs of life. We apply our Fix, Boost, Fill approach to reactivating parts of a website that appear to have been forgotten.

Most companies, however, cannot put a value on visibility. What does “1.2 million impressions” mean in terms of business success? Here’s a way to break down the numbers in a meaningful way so that you can evaluate an ROI metric from SEO.

First, choose a long time frame, because a month on month measurement is meaningless. Seasons change, trends change and competitors move around. Take a long time period to get a handle on the numbers. What we’re doing is calculating how much visibility you need to achieve a sale. This is crude but effective. Ask yourself these questions (using Google Analytics to help you)

• How many conversions did you achieve in the past year (number of sales and value plus number of people)?
• Using Assisted Conversions, how many of these were assisted by organic search?
• How many unique visitors came to the site over that time frame via organic search?
• What were the same numbers for non-organic search traffic?

Using the above numbers you can calculate various values:

• The number of new visitors needed to achieve a sale.
• The number of visits needed to achieve a sale.
• Average value of a sale and of a customer.
• Average value of a visit.

Using Apollo Insights, which records search impression data over time, you can also cross reference your visibility with your traffic – for example, calculating how many impressions your website gains in Google compared with the traffic gained from Google. This allows you to calculate, if you wish, the value of an impression.

That’s great maths and fun to do but, as we have explained further in this document, that kind of granular detail can be misleading. But, creating those kinds of benchmarks allow you to measure improvement.

The nutshell ROI for SEO

• Measure constant refinement.
• Look for improvements in the quality of traffic – number of users, bounce rates, pages per session and time on page.
• Check whether more of your website is visible than before, and whether the visibility you are achieving across all search results is stronger now than before.
• Do more people get to the pages that matter and do they follow your calls to action?

Social media ROI: visibility and traffic

If you spend, say, £4,000 per month on your social media marketing management, don’t expect to be able to record a fixed amount of sales coming from your social media channels.

The first problem is that social media conversions may come from other people talking about you, not through your own efforts. Tools can help you track things, but if you are focused on getting X return for X spend, you will end up trying to use social media as a broadcast advertising medium. It is not. Social media is, effectively, people living their lives, chatting, just looking to be entertained, not sold to.

You need to work to objectives and measure against those objectives. Some Vertical Leap clients are seeking traffic to their website while others are eager to grow brand awareness. In some cases it is about improving sentiment from negative to positive. All of these things can be measured:

• Sentiment: Using Twitter and other tools like, Brandwatch or Sprout Social, you can measure the sentiment of posts that talk about your brand, enabling you employ a strategy focused on improving that.
• Traffic: Google Analytics gives a lot of useful info about which social channels send referral traffic to your website. If traffic is your goal, this is easy to report on.
• Brand awareness: This can be measured by counting brand mentions. How many people are talking about you? What is the size of their audience? Tracking mentions over time can tell you whether you are reaching a growing number of people. Also, your follower counts are likely to rise, along with referral traffic.
• Interactions: Interactions are more popular than reach, when it comes to measuring the success of social media marketing. If people share your content, comment, click like, etc, they are ‘engaged’.

How to measure ROI on social media

Set your objectives for what you want social media marketing to achieve for you. Then select the right metrics to track for those objectives – record your benchmark and evaluate those.

For more information, read A beginner’s guide to social media lead tracking

How to get ROI from content marketing

Newspapers and magazines pay journalists to write articles for them. The journalists are paid by the word or according to their reputation. They are generally not paid based on how many people will read the article.

If you write a feature for The Independent which is published on page 12, you have no idea how many of the readers even looked at, let alone read, your article.

Imagine if a newspaper was to count the readership of every article and stop commissioning those that people don’t read. Soon, you would have a newspaper that is half the size, which would make it less impressive and less people would buy it. The readership would fall further until, eventually, there would be no point publishing it.

Content marketing is like this – you can measure the readership of one piece of content, but the stats for a single article are useless. What you need to think about is your body of work.

At Vertical Leap, we look at a number of metrics to measure the value of content:

• Momentum: As your body of work grows, so does your website’s ability to attract traffic from search and social media, and you see the readership increase over time.
• Improving engagement: As well as the number of people reading content, we like to examine which content works well by analysing exit rates, time on page and whether readers do something else as a result of reading. Content marketing is an opportunity to experiment with ways to attract and engage an audience.

Customer retention: Content marketing is not only about creating articles to bring people to your website. It is also about serving your existing customers and readers. For example, customers who have bought your products need further information about those products – such as how to use them or maintain them. They may want to be entertained or kept informed about other things you are doing. Use Analytics to measure the engagement of your returning users compared with newcomers.

So, what does good look like?

Considering the many permutations and granular ways you can measure results from digital marketing, you’d think measuring ROI is easy. But each channel offers different aspects to your overall goal of growing visibility, traffic and sales. Not everything leads straight to a sale – some activity is designed to increase your brand authority so that you are easy to find when people look for you later. Content you create for users now may only lead to a sale months later.

Vertical Leap works with specific and measurable objectives that are linked to each service.

Assume that the right visibility and traffic will lead to sales, so don’t measure SEO month-by-month on sales. Social Media is about brand awareness, traffic, customer sentiment – all kinds of things, so define its purpose for you and then select the metrics that help you track progress.

The answer to the question “what does good look like?” is that it really depends. If you define the purpose of your marketing, you can define the benchmarks against which you can track progress. If you improve on those benchmarks, you are doing well. The only question then remains – are you improving fast enough?

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