A frequent question that I come across when talking about digital marketing services is , “Can do you measure the ROI for the money spent on digital marketing” . This is rather a subset of a larger question, “Can you measure the ROI on marketing” . Hmmm…interesting.
Before we talk about measuring the ROI on digital marketing, we need to be clear about what is the goal of digital marketing ? What is the exact problem we are trying to solve. Yes, at a birds eye view level it is probably an increase in the revenue for most companies, but in the short run , through the different digital marketing campaigns , the micro goals may be any of the following
- Increase engagement with the customer
- Get customer feedback
- Create a presence for your brand on-line
- Generate leads
- Improve customer retention
- Understand customer loyalty
- Generate demand
Maybe, a few more could be added. In the long run, they all may contribute to more revenue for the company, or if the company is a not for profit for social cause, create more engagement with that cause. When we talk about measuring the ROI, we need to measure the performance against these micro goals , which will add up to serve the main goal of increased revenue or increased engagement with the social cause.
So, now lets look at measurement of ROI against these micro goals. Almost all major social media channels ( Facebook, Google, Linkedin, Instagram, Pintrest, Youtube ) give you quantifiable metrics using which you can measure the reach and effectiveness of your digital marketing campaigns. You can for example, calculate the cost of each ad view( in case of brand awareness ) , average acquisition cost ( in case of a lead ) and due to the interactive nature of social media channels, measure the customer engagement. The fact that digital marketing campaigns can be precisely targeted to a relevant audience further helps in ensuring a good ROI. This is very different from the traditional marketing methods, where the the approach is mostly of spray and pray and while at a broad level you can somewhat measure the ROI, it is more difficult to measure the same on the micro goals we talked about earlier. Digital marketing lends itself well to measurement criteria and every penny spend can be well accounted for.