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How to Measure and Improve Your Marketing ROI

Jennifer Dublino
Jennifer Dublino
business.com Contributing Writer
Updated Sep 21, 2022

Ensure you're getting the most from your marketing campaigns.

The key to improving your marketing ROI is continuously measuring results and adjusting your marketing campaigns accordingly.

Measuring and optimizing your marketing processes will help you identify winning campaigns that significantly impact your bottom line. Establishing specific key performance indicators (KPIs) for all your campaigns is critical to determine your marketing return on investment. Measuring your marketing campaigns’ ROI will help you uncover what works and what doesn’t so you can scale or optimize performance.

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What is marketing ROI?

Marketing ROI refers to the sales a digital marketing campaign generates. By measuring ROI for digital marketing campaigns, you can see how each campaign performs in specific metrics vital to your business. For example, you can measure a campaign’s results in terms of sales leads generated, page views, successful lead conversions and social media followers.

Revenue or sales is the most crucial metric determining true marketing ROI, revealing whether your campaigns are making or losing money. But not all your campaigns aim to generate revenue or sales. You may launch brand awareness campaigns or campaigns that aim to get more customers into your marketing funnel. Your campaign’s goals will determine how you measure marketing ROI. 

TipTip: Measuring ROI at every stage helps you find leaky sales funnel areas. For example, you may have good website traffic, but if you aren’t getting leads, you’ll know your landing page or website needs improvement.

How to measure your marketing ROI

Here are four standard digital marketing metrics businesses use for ROI analysis.

1. Measure conversion rates to assess marketing ROI.

If your digital marketing campaign aims to convert visitors into leads or customers, measuring conversion rates will help you see whether your campaign is succeeding. 

Checking conversion rates by channels and devices is essential so that you can invest more in channels and devices that perform better.

Did you know?Did you know? Generally, a digital marketing ROI of 5:1 is considered good, meaning you get back $5 for every dollar you spend.

2. Measure cost per lead to assess marketing ROI.

If you’re bringing in leads through your marketing campaign, you must measure how much you spend on each new lead. To determine cost per lead, divide the total campaign spend by the total leads generated through that campaign. 

If the cost per lead is more than what you’ll get after closing the sale, your ROI isn’t positive and you should make changes.

3. Measure cost per acquisition or sale to assess marketing ROI.

Cost per acquisition or sale is the average cost of acquiring a new customer. To determine the cost per acquisition, divide the total campaign spend by the total number of sales generated through the campaign. 

If the cost per acquisition is more than what the customer brings into your business, it indicates a negative ROI. You’ll need to optimize your marketing campaigns to lower the cost per acquisition.

4. Measure customer lifetime value to assess marketing ROI.

The customer lifetime value metric measures what your customers will spend over their lifetime. To calculate customer lifetime value, multiply the average sale per customer by the average number of times a customer buys per year, multiplied by the average retention time in years for a typical customer. 

Looking beyond the first purchase and seeing long-term profit yields a more accurate ROI. If customers have a high lifetime value, you can afford to invest more in customer acquisition.

Tip: Use social media to improve customer retention and improve their customer lifetime values. Positive social interactions build relationships, trust and loyalty. 

How to improve marketing ROI

Your marketing ROI measurements will show you where you need to improve. Here are some ways to improve your marketing ROI.

1. Measure the effectiveness of core metrics.

Not all metrics carry the same weight. Sales, leads and traffic are the core metrics for any marketing campaign. Even so, you should drill further into these metrics to determine their impact on your revenue. For example, when looking at traffic, measure your email bounce rates, conversion rates and unique visitors.

2. Experiment with different marketing channels.

Experiment with various marketing campaign channels to determine the ones that yield the highest ROI. Experiment with crucial channels like:

  • Email marketing
  • Direct response marketing
  • Social media marketing
  • Brand ambassadors 
  • Customer loyalty programs
  • Video marketing 
  • Paid ads 

A campaign’s performance will help you see the channels that best suit your target audience.

3. Implement A/B testing across all campaigns.

Split-test your landing page elements, such as copy, graphics, navigation links, calls to action and website colors, to determine the changes that prompt visitors to take action. Additionally, try A/B testing on email campaigns with different subject lines, images and offers. Compare how recipients react to the elements you’re testing. 

Define a specific period over which a split test should run. After identifying a winning campaign, continue optimizing it so you end up with the highest sales or leads at the lowest cost.

4. Focus on your ad spend and income.

To improve marketing ROI, it’s essential to know how much you’re spending at each stage of your campaigns. Keeping tabs on your marketing spend can help uncover areas where you are spending too much but getting poor returns.

Determine how your channels are performing by comparing their conversion rate, leads and profits. From there, decide whether the results are acceptable.

5. Conduct market research to understand your target audience.

If your marketing messages aren’t resonating with prospects, you may be missing the mark. Conduct some market research to discover what prospects want, what’s important to them and what they’re willing to pay.

Here are some additional ways to research what your customers want: 

  • Look at competitors’ offers.
  • Monitor social media (yours and competitors’) to see what people are saying. 
  • Read online reviews (yours and competitors’).
  • Ask customer-facing employees to communicate with customers about their needs. 

TipTip: Collect survey data online or via email or text to gather opinions and better understand a specific demographic.

6. Personalize your marketing to improve ROI.

Nobody wants to feel like one of many. Today’s consumers expect companies to know what they want and present excellent deals. According to recent data from Cheetah Digital and Econsultancy, almost half (49%) of consumers are annoyed when they receive irrelevant content or offers. 

Understanding individual customers’ needs and wants is critical, and the easiest way to do this is by using one of the best CRM software solutions. CRM software provides insights into customer behavior, such as their purchase history and product page visits. You can see if they looked at but didn’t purchase recommended items or if they abandoned their shopping cart. You’ll be able to tailor offers to meet their needs and improve sales and customer satisfaction.

7. Utilize email marketing to improve your campaign’s ROI.

While it’s been around a while and isn’t the sexiest marketing strategy, email consistently outperforms other marketing channels. 

Use one of the best email marketing services to streamline email creation, sending and analysis. Use email regularly to inform, entertain and sell. Email is affordable and effective, giving it a high ROI. You can easily automate and personalize emails while making them interactive, driving customers directly to product pages and promotions. 

8. Share data and offer seamless experiences across platforms.

Consumers expect effortless buying experiences across platforms, so your systems must share customer data in real time. If a customer has already bought a product, they don’t want to see a promotion for it, so the email system must talk to the CRM solution.

Customers also expect to shop from various devices and pick up where they left off, no matter what platform they’re using. So, for example, if you utilize social shopping, you’ll need to sync this data with your website tracking.

9. Reward customer loyalty to boost marketing ROI.

If you don’t have a customer loyalty program, consider instituting one. Frequent buyers like to be acknowledged and rewarded with discounts, early access to new products, special promotions, exclusive events and shout-outs. But it’s not just about the rewards; it’s about creating a relationship with high-value customers and making them feel special. 

Don’t take frequent buyers for granted because you may not keep them. In fact, The Wise Marketer reports that 67% of consumers frequently buy from a brand but don’t consider themselves loyal to it. About two-thirds of these individuals say they’d feel closer to the brand if it gave them extra value to stay loyal.

David Gasparyan contributed to the reporting and writing in this article. 

Image Credit:

Rawpixel.com/Shutterstock

Jennifer Dublino
Jennifer Dublino
business.com Contributing Writer
Jennifer Dublino is a prolific researcher, writer, and editor, specializing in topical, engaging, and informative content. She has written numerous e-books, slideshows, websites, landing pages, sales pages, email campaigns, blog posts, press releases and thought leadership articles. Topics include consumer financial services, home buying and finance, general business topics, health and wellness, neuroscience and neuromarketing, and B2B industrial products.