ROI formula for a digital sales and marketing strategy

A couple of weeks ago, I posted a video blog with Nando’s posing the question of how you can determine ROI from a digital media or social media campaign.

Proving ROI and building a business case for investment in digital, from internet–to–intranet, is an ongoing boardroom demand and often challenges the organisation.

I have determined some project modelling below that you can use in your own organisation.

Digital sales and marketing ROI modelling

Biggest common mistake:

A lot of marketers follow the “big” idea, not knowing what the objectives are or the priority. You need to be very clear and put work into your objectives planning upfront, if not, you cannot assign a KPI and cannot determine ROI, regardless of how great the idea is.

Common objectives:

1. Brand/product awareness
2. Lead generation
3. Conversion
4. Acquisition, leading to positive word-of-mouth recommendation and/or repeat sales

ROI model:

Hard KPI’s

1. Cost per acquisition
a. Click to lead
b. Cost of conversion
2. Return visit
3. Social media recommendations

Wider KPI’s

1. Competitive advantage
2. Increased effectiveness
3. Decreased operational costs (e.g., eCommerce)
4. Data value
5. Social media research value
6. Customer satisfaction

This all seems straight forward, however, very few organisations have any idea of what their target cost per acquisition is. It is a common question in the affiliate marketing space. With affiliate marketing or performance marketing you set a rate/commission you are willing to pay for an action. For example, $1 a click, $5 a lead, 10% a sale. I have witnessed many companies struggle to determine what they are willing to pay for an action.

Most companies’ final judgment always favours investment for sales/profit and if you don’t know what you are willing to pay for a sale, proving ROI becomes a business case headache.

Before you start, number crunch upfront. Even if your project isn’t about sales but is about brand awareness, your greatest measurement in the digital space is based on an “action” of some sort to determine success.

ROI of sales conversion

Act like an affiliate marketing company. Determine what you would be willing to pay for an “action to sale” and work your ROI figures back from there. This gives you a clear benchmark and an accountable procedure to take back to your board.

ROI of brand awareness

For brand, with social media you can identify brand health and awareness in a whole new tangible way. Monitoring how many people are talking about you online, their perception of your brand, ratings and reviews of your brand and its products is easily tracked. Using before and after campaign periods delivers solid ROI report modelling. There are lots of free social media monitoring tools you can use. Dreamgrow put together a list of 54 free tools here.

ROI by channel

One of the best benefits of digital media is being able to track performance by channel. It means you can optimize and move your money according to what is working best. Ensure you divide your channel plan into, earned, paid and user generated media and plot the results on a daily basis. Move content and campaign elements continually into the channel that is delivering best for you. This way you can show your senior executives how you optimised the ROI continually.

ROI by data

Some say data is the gold at the end of the internet highway. It certainly is and provides a long-term ROI model. Data delivers so much into an organisation that has far reaching value:

1. Customer satisfaction scores
2. Repeat sales tracking
3. Social media CRM
4. Customer LTV
5. Market research
6. Lower cost of data collection and information

ROI by efficiencies

Digital media drives many benefits and when tracking ROI to report up to your organisation don’t forget to add additional value to the business. For example:

1. Competitor analysis (Use your social media monitoring tools to check out your competitors too.)
2. Increased employee productivity and collaboration
3. Increased customer engagement and touch points
4. Reduced costs of information via other mediums, such as print
5. Time investment versus return

Fi Bendall is the managing director of digital and interactive consultancy company Bendalls Group. With over 20 years’ experience, Bendall has worked with global brands including BBC and Virgin, and is an expert in how businesses can approach strategy in the digital world. You can follow her on Twitter at @FiBendall, and can contact her through Bendalls Group.