We speak to thousands of businesses a year. I work with the largest brands in the world and the smallest businesses. They all struggle with the same thing: measuring the impact of their digital marketing. While digital marketing now accounts for over 50% of marketing budgets, most businesses are still questioning the return on investment.
Digital is actually the most measurable marketing channel we have. There are multiple data points to measure any digital marketing execution. Yet businesses still struggle because they don’t have a measurement plan in place.
Let’s walk through these five steps.
1. Define your strategy.
You can’t measure your marketing if you don’t know what you want it to achieve. For example, the metrics that measure brand awareness are different from the metrics used to establish conversions or sales. Start by clearly defining your strategy and what you want to achieve.
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Your strategy will usually be defined by the stage in the marketing funnel that you want to influence. The stages of a marketing funnel are awareness, interest, desire, action, retention and advocacy. Consider what specific goals you have for your marketing and go from there.
2. Determine your KPIs.
KPIs, or key performance indicators, are the primary metrics that you use to determine if your marketing is working. This is because we can’t actually measure sales or the final outcome we want. For example, a restaurant may want to bring in new customers. There isn’t an accurate way to measure how many new customers came specifically because of a Facebook ad, a Google search result or an email campaign. Even businesses that sell products online don’t necessarily know which marketing activities drove a specific sale. In many cases, it is a combination of activities that lead to a sale. For example, someone may have seen a search ad, followed a brand on Facebook and received an email. Most businesses don’t have an accurate way to know how much each channel contributed to their ultimate sales.
This is why businesses use KPIs. KPIs allow us to measure the impact of an individual channel. Each marketing channel should have one to three KPIs and they should all reflect the strategy. For example, a business using Facebook to build awareness would use reach as a KPI, and a business focused on promoting blog content may use clicks or website traffic.
When choosing KPIs for your business, consider ones that demonstrate quantity, quality and cost. For example, if your strategy is to generate website traffic, your quantity KPI would be clicks, your quality KPI could be the amount of time they spent on your site and your cost could be your cost per click.
3. Set benchmarks.
Benchmarks are the targets for your KPIs. For example, your KPI for email marketing could be open rate and your benchmark defines what a “good” open rate is. Essentially, a benchmark determines if your results are good.
Setting benchmarks can be challenging for businesses. There are three areas to assess to determine benchmarks for your KPIs. The first is to look at industry averages. For example, research average open rates on emails. While your business may be different, industry averages can give you a starting point.
Next, look at historical performance. This provides context to how your organization has performed in the past. Finally, examine the resources you have dedicated to growing results. For example, if you’re doubling your resources on email marketing, you may expect your open rate to grow by 10%. On the other hand, if you’re not allocating additional resources, your benchmark could be maintaining the rate you set last year.
After evaluating all three areas, set benchmarks for your marketing channels.
4. Establish ROI.
ROI can tell you if your digital marketing is profitable. To determine ROI, you need to evaluate what you are putting into your marketing execution and what you need to get out of it to maintain profitability.
Evaluate the investment in your digital marketing channel. Be sure to include time and effort, not just hard costs.
Next, determine what you’d need to get in terms of sales for your investment to payout. For example, if you’re spending $100 on email marketing, you need to generate at least $100 in profit for the email marketing to payout. If your profit margin is 50%, you’d need to generate $200 in revenue from every $100 spent on email marketing. Knowing this ROI benchmark, you can evaluate your email marketing KPIs to ensure that your emails are likely to be profitable.
5. Build a measurement program.
Once you’ve set your KPIs, benchmarks and ROI, the next step is to develop a measurement program where you are reporting and analyzing your results regularly. Most businesses review their metrics monthly. Build reports or a dashboard and establish a regularly recurring time to review your results and evaluate your effectiveness.
Regularly measuring your digital marketing is vital to making smart decisions that grow your results over time. These five steps can put you on track to measure what matters and establish what success looks like.