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Measure Digital Marketing ROI: Optimize for the Right Metrics
Measuring digital marketing ROI is a tricky thing to wrap your head around.
Digital campaigns offer dozens, even hundreds of metrics to track. Should you be focusing on click-through-rate? What about impression share? What do those metrics even mean? This article will provide you with a framework for understanding and measuring digital marketing ROI.
Business owners and managers tend to think in terms of inputs and outputs. How much did we invest in advertising? What was the return? But, it’s not always obvious which inputs and outputs to measure when it comes to marketing metrics. For most folks, because modern marketing involves so much data, it’s easy to lose sight of the forest for the trees.
As a result, too many businesses fixate on vanity metrics like page visits and impressions when what really matters is what’s happening on the ground—purchases, enrolments, etc. Dollars and cents, not views and clicks.
There used to a be a joke in marketing: “Know what ‘hits’ stands for? How Idiots Track Success.” It’s kind of mean, we know. But it points to a fundamental truth about people: we like shiny things. The problem is; shiny metrics can distract from what’s really going in with your marketing investment. Worst case, you’ll waste time and money optimizing for the wrong things.
This article will help you figure out which metrics are telling you whether your marketing is truly moving the needle for your business.
Digital Metrics Should Serve Business Metrics
...and not the other way around. What do we mean? Let’s use the Quality Score in Google Ads as an example. Measured on a scale of 1-10, the score is a rough measure of how well your ad meets users’ search intentions or the likelihood that a user will click on your ad versus a competitor’s. You might think, “I’m a quality business; I should be a 10/10 advertiser.” And you could burn hundreds of hours trying to get that 10/10 score.
Was that really a good use of resources? Not if those perfect-10 ads aren’t generating valuable leads.
The problem is; you could be optimizing your ads for the wrong audience. But if you look only at the 10/10 quality score, it seems like you’re doing everything right. When you examine the end results of your efforts and discover that none of those clicks are converting into actual leads, that’s the metric that tells you what’s really happening with your ad spend—and that you need to rethink your strategy.
In this case, the business metrics that should be your primary focus are:
- How much did we spend?
- How many leads did we get?
- What was the average value of each lead?
- Ultimately, was the ad campaign profitable?
The quality score, by contrast, is a secondary metric. It can help you understand why something like an ad campaign works or doesn’t work, but it doesn’t tell you whether the campaign was actually worth the investment. That’s where you turn to primary metrics, like the ones above.
Primary metrics tell you what happened; secondary metrics tell you how it happened.
We don’t optimize for secondary objectives; we use them as a means to optimize for the most important indicators. In other words, make sure you’re optimizing for your business, not your digital metrics.
When a Click Doesn’t Click
Unfortunately, we’ve seen marketers throw all kinds of numbers into reports that make it look like something’s happening, with digital dashboards lit up bright green. You might hear, “Well, yeah, we haven’t gotten any conversions yet, but look at how many clicks and impressions we’re getting!”
As a business, your end goal isn’t collecting clicks. It’s collecting money. And if all those clicks don’t translate into conversions, they don’t mean anything. Trees, not forest. In fact, you could have far fewer clicks that result in much more successful marketing campaigns. If there’s more revenue coming in, it doesn’t matter if your dashboard is red.
Here are some concrete examples to help you understand when a click matters and when it doesn’t.
One question clients have asked is, “Why should we pay $30 for a single search ad click when we could run display ads and get tons of clicks for 3 cents each? Why pay $30 just to get someone to my website?” (Often followed by, “That’s crazy.”)
It’s not crazy if what you sell is worth $30K per sale, and you’re optimizing your ads for lead quality, not click volume. If you work out the percentages, you only need 1 in every x number of clicks to convert for you to make money. That’s thinking from a business perspective, not a secondary metric perspective. So instead of, “It’s $30 to get a click,” you’re saying, “It’s $30 to get an opportunity to sell $30,000.”
That’s why, as a marketing agency, we might spend a lot of time fiddling over a handful of keywords and phrases in a client’s ad. Because a single word in one ad can vastly impact the quality of traffic, you get. Take the term “oil change,” for instance. Someone could be looking for how to do an oil change themselves versus finding a shop near them to do the work—which means your ad’s keywords make all the difference in whether those clicks turn into quality leads.
Your marketing team (or agency) should be spending their time figuring out precisely what that wording should be.
Search engine optimization
At a basic level, traffic to your website is good. And investing in an SEO strategy that bumps your web pages higher in search results can generate traffic. But it’s the value of every single person who visits your site that can make SEO either viable or less viable in terms of marketing investment.
Tracking your Google ranking for targeted search terms, along with the number of site visitors, new visitors, etc., on your site will tell you whether your SEO efforts are having an impact...but not whether you’re getting a good return. For that, you need to examine the average conversion rate for your site. How many of those visitors are turning into qualified sales opportunities?
Knowing the conversion rate and/or revenue from your web traffic will help you put a ceiling on your SEO spend. There may be search terms that seem really attractive. Still, suppose it’s going to take a considerable investment to rank on the first page of Google. In that case, that moves your breakeven point much further forward.
One marketing tactic that’s especially likely to cause shiny-object syndrome is email. And, for many companies, it’s hard to know how much to invest in building a subscriber base and managing a newsletter.
Ultimately, it depends on the product or service you’re offering and whether a newsletter would effectively support more sales. We’ve seen that newsletters simply become informational, with marketers focusing on things like open rates, click-through rates, and unsubscribes. That’s a great example of chasing the wrong metrics.
Instead of asking whether your open rate is high enough or how many people are clicking on your links, evaluate whether the messaging and links in your emails truly support your marketing objectives and business goals. Don’t let a dashboard filled with nice-looking numbers distract from what’s most important: marketing that makes people come back and buy more.
Get the Real Story
Hopefully, by now, you’re feeling a little better equipped to ask your marketing team or agency the right questions to uncover whether your marketing is genuinely having a positive impact on your business. No one expects you to be an expert—digital marketing involves a lot of complex signals, and it’s your marketing team's job to analyze and apply them.
What you can do, as a business owner or manager, is to look at the primary metrics and evaluate whether you see enough leads and revenue to justify your marketing spend. Then you might come to us and say, “The money isn’t adding up; we need to make more revenue from this campaign.” After that, it’s up to us to interpret the more complicated secondary signals, figure out why things aren’t working, and fix them.
Just remember, if someone throws you a marketing dashboard full of green lights, make sure those metrics are telling the real story of your dollars and cents.
Need help figuring out whether your marketing efforts are paying off or how to make them more effective? We’ll be straight with you. Book a free consultation today.
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