You’ve invested a lot into your digital marketing efforts. The planning, the mapping, the late-night keyword searches. How can you tell if all of your hard work is actually paying off? I mean, that’s the whole point of all this blogging and SEO-ing, right?
It’s important to be able to track and measure your actual return on content-driven tactics. Unfortunately, it’s not always as straightforward as one blog post equals two new customers. The Content Marketing Institute has even gone so far as to say marketers from the dawn of time have “always sucked at measuring marketing.”
Ouch.
It may not be easy, but we’re not ones to back away from a challenge. This post is about how to measure all of the ways your content-driven tactics are paying off. It’s ROI time, baby!
What Even Is Marketing ROI?
In technical terms, ROI (that stands for return on investment) is “a performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments. ROI tries to directly measure the amount of return on a particular investment, relative to the investment’s cost.”
According to the Economic Times, marketing ROI — sometimes known as ROMI (return on marketing investment) — is “a metric used in online marketing to measure the effectiveness of a marketing campaign.”
ROMI is distinct from ROI because marketing is a different kind of investment. Instead of calculating how much money (return) you get back from the dollars (investment) you put in, we need to figure out how your awesome content (investment) translates into business growth and ultimately money in your pocket (return).
OK, So How Do I Measure It?
The simple answer: math. These two formulas work especially well to calculate your marketing ROI.
The first (Formula A) is from Convince and Convert. It’s a pretty straightforward math equation:
The second formula (Formula B), from Hubspot, looks like this:
If you’re particularly math-y, you may notice these formulas will lead you to the exact same result. Why two formulas? It’s always good to have options, and depending on how you’re gathering data one may be easier to use for your business than the other.
(For fans of equation B, Hubspot offers members an ROI calculator where you can punch in your numbers and let robots tally your result.)
Now, let’s get calculating.
The Step-By-Step Guide to Calculating Your Content Marketing ROI
Step 1: Get granular. The first thing to understand is what exactly you’re measuring. We recommend getting granular. Instead of trying to roll all of your content and campaigns into one grand calculation, dig into the cost of each program or campaign. This will give you a lot of little data points to add together into a more comprehensive ROMI figure later on.
Step 2: Gather your data points. To accurately calculate your marketing ROI, you’ll need the following data points:
- Total investment (money you spent creating and promoting your campaign)
- How many leads your campaign generated (how many people filled out the lead-generation form via your content)
- Your lead-to-customer rate (how many of those leads became new customers)
- The estimated value the average customer brings to your company
Let’s look at a real-world (made-up) example. Your company manufactures vacutainer tubes — those sterile tubes phlebotomists use when they draw blood in the hospital. Your content marketing team has put together a plan that you hope will position you as the authority in the vacutainer space. Part of that plan is a white paper that can be downloaded from a lead-generation form on your landing page. You’ll promote the white paper with a month-long targeted social media campaign.
The total cost to create and promote the white paper (writing, design, project management, promotion, social media boosting, etc.) is $5,000.
Cost of investment: $5,000
At the end of your campaign, using URL tracking, you’ll be able to see how many leads clicked through to your white paper and how many entered their information to download it. Let’s say 300 people visited your landing page over the course of the month and half of them filled out the form to download your white paper. The downloaders represent your leads.
Number of leads: 150
Lucky you, you’ve got a great sales staff who does a bang-up job converting leads to customers. Let’s say they hit the global average and convert 2.4% of your leads to actual vacutainer-ordering customers. This is the lead-to-customer rate you use to calculate likely new customers.
Number of new customers: 3 (150 x .024)
Taking into account the lifetime value of a customer and your profit margin, let’s assume each customer is worth $5,000 in profit to your company. This is your profit value.
Profit value for this campaign: $15,000 (3 x $5,000)
Step 3: Plug in the numbers. Now we’re ready to crunch the numbers.
Let’s start with equation A:
Return: $15,000
Investment: $5,000
($15,000 – $5,000) / $5,000 x 100 = 200
Your total campaign ROI is 200%
Now for equation B:
Number of leads: 150
Lead-to-customer rate: 2% (or .02)
Average profit per client: $5,000
[((150 x 0.02 x $5,000) – $5,000) ÷ $5,000] x 100 = 200
Your total campaign ROI is 200%.
Apply this formula to video or email campaigns, blogs and all relevant content marketing pushes and you’ll have a decent idea if all of your hard work is working hard for you.
A Note About KPIs
A recent LinkedIn survey found that 42% of marketers with lead generation objectives used cost-per-click as their metric to measure ROI.
It’s natural to gravitate toward more easily measurable metrics like clicks and site traffic. But, according to LinkedIn, “While these metrics might be more readily available, they aren’t really measuring ROI. Instead, they are actually key performance indicators (KPIs), which should be primarily used to optimize their campaigns.”
KPIs are crucial when it comes to short-term decisions, whereas ROI is a “long-term game.” “KPIs are a forward-looking predictor of end performance, whereas ROI is used as a backward-looking informer of future budget allocation decisions,” LinkedIn says.
From Theory to Practice
Knowing what type of content your customers engage with and for how long gives you a better understanding of how to create a future content marketing strategy.
The above fictional example represents a simplified way to gather the data you’ll need to understand your business’s marketing ROI.
Fortunately, there are a number of online tools available to help you track things like engagement and lead generation. If you’d rather outsource all of this arithmetic, working with a data-driven content marketing agency is a great way to go.
Calculating marketing ROI does require a little more legwork than in other sectors, but the good news is it is totally doable — and oh, so worth it.
