How to Calculate ROI on Your Digital Marketing Spend

Measuring the Return on Investment (ROI) of your digital marketing is crucial for justifying budgets and optimizing strategy. Here's how to do it.

The Basic ROI Formula

The simplest formula is: (Net Profit / Total Marketing Cost) x 100. A positive percentage means you're making more than you're spending.

Key Metrics to Track

• Customer Lifetime Value (CLV): How much revenue a customer generates over their entire relationship with you. This is crucial for understanding the long-term value of acquisition.
• Customer Acquisition Cost (CAC): The total cost of sales and marketing to acquire a single customer. Your CLV must be higher than your CAC.
• Conversion Rate: The percentage of visitors who take a desired action (e.g., make a purchase, fill out a form).

Attribution Modeling

For a more advanced view, consider attribution modeling. This helps you understand which channels (e.g., SEO, PPC, social media) are contributing most to your conversions, allowing you to allocate your budget more effectively.