How To Measure The ROI of Digital Marketing Accurately
A common experience that cuts across different eCommerce niches among eCommerce executives and business owners is a sense of blindness towards measuring their digital marketing ROI. But is it possible to measure the ROI of your digital marketing? The short answer is yes. There are software tools that measure your marketing input and result, which will give you a sense of what your ROI is. With that, you will have some data that you can use to make predictions about your future marketing campaigns.
However, you also need to complement this with competitor analyses, which require you to know where to look and what to measure. If you can get good insights, you also have to compare the results and set your marketing standards, a data set, which will cover your ROI goals, KPIs and OKR. The issue with this is that during the data collection and competitor analyses phases, you will find several insignificant variables that appear useful to your data set. Despite the challenges, eCommerce marketers still find a way to collect critical data to use as a formula for measuring digital marketing ROI.
Now that you know that there are effective ways to collect critical data for measuring ROI, let’s look at some of the obstacles you will face in the process.
Too Many Cooks Spoil The Broth
When it comes to collecting and making sense of data, one of the quickest ways to make your efforts almost useless is to assign multiple people to the task. Like the old saying, too many cooks spoil the broth; when you have more than one person collecting and analyzing data, your data will lack clarity. The context will be unclear and the source will be undefined. Not to mention that it will be difficult to see the clear use of the data.
A better way to collect, measure and analyze data is to assign only one person who is a data expert to the task. This way, the expert will pay attention to the context of the data to make meaning of the variables, which will enable you to see a well-defined use of the data along with other important benchmarks. Of course, you can have a data analytics team with more than one member. But make sure you don’t have multiple teams or persons who don’t understand data dealing with your digital marketing data.
External Influence
The biggest external influence on eCommerce, digital marketing, and consumer behavior in the last year is the coronavirus pandemic. The nature of the change is drastic and unpredictable, and as a result, eCommerce merchants and stakeholders are having to make sudden decisions now and then. Since we are still going through the pandemic, which is an external influence, make sure you’re always quick to study sudden market changes and consumer behavior. One of the major trends of the current eCommerce market is unpredictability, so, you might want to keep that in mind.
Generally, in eCommerce, whether there’s an ongoing pandemic or not, there will always be external influences that will affect your digital marketing. So before you run your marketing campaigns, make sure you consider external influences that can affect the performance and results of your digital marketing. This doesn’t mean you will abandon your digital marketing when there are external influences, rather use the influences to your advantage.
Stay updated on the consumer behavior in your niche. What are your target audience’s latest pain points and purchasing habits? With these insights, you will have the necessary information to revise your marketing campaigns regularly. Of course, you need to modify your marketing campaigns regularly.
How do you collect data when external influences affect your digital marketing? Pay attention to irregularities in your digital marketing and eCommerce business engagements. Use data analytics tools the same way you do for collecting and analyzing your regular marketing data. But this time, analyze the data each time there is an irregular incident such as traffic spike, purchase spike, extremely low traffic, etc. Have a habit of figuring out the causes of irregular incidents, and always note the date, how long it lasted, etc. After analyzing the external influence using the data you collected, make sure you have a good understanding of how the eternal influence drove change.
Define Your ROI Formula
Before you can accurately measure your digital marketing ROI, you will have to create a well-defined ROI formula to help you know what to count as a positive return. To do this, create a blanket-fold metric that matches your eCommerce business. Here are four items that can make up your ROI formula;
Acquired Leads: how many visitors converted into a warm lead, that is, potential buyers who showed interest in your product or brand but are not ready to make a purchase?
Lead-to-Customer Conversion Rate: how many of the warm leads made a purchase?
Average Sales Value: note the average price of your products so that you can differentiate your profits during promo sales and discounts from regular sales.
Marketing Cost or Ad Spend: what is the overall cost of your marketing campaign? Calculate for one marketing campaign at a time. The overall cost of a marketing campaign is the fixed cost for the specific strategy and the cost of resources which include content production cost, staff incentive or agency fees, etc.
When you provide accurate numbers for these four metrics, you will have a formula that looks like this:
“{((number of warm leads x lead-to-customer rate x average sales price) – marketing cost/ad spend) ÷ marketing cost/ad spend} x 100”.
You still have to consider external influences. Additionally, your ROI formula won’t be effective if too many people worked on your data, which can make it an incorrect reflection of your digital marketing models.
Over To You
Keep in mind that you need to make this process agile so that your data will always represent the latest market trends and consumer behavior. Doing this will help you create an accurate ROI formula or metrics to effectively measure your digital marketing ROI.
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