The Web For Business.com Blog

Internet marketing observations, perspectives, tips and tricks for your education and enlightenment.


How to Measure Online Marketing ROI - Part 1

Mark Kawabe - Tuesday, December 06, 2016

Calculate ROI for Online MarketingMarketers (and those who hire them) want everything they do to pay off in some fashion. You're making an investment in a website, or email marketing, or social media marketing, and of course you want to see positive results. Measuring the ROI of a website or online marketing campaign is getting easier, but it still takes know-how to drill through the numbers and tell your finance department what they want to know. Here are a few thoughts on calculating the ROI of your online marketing efforts.

Getting Started

Let's say you're just setting up your business and getting all your marketing materials in order, including your website. If you have a business plan for your business, you'll probably have heard that it should be a living document. While a business plan is a good start, it needs to be adjusted as your new business meets the realities of the market. A plan is great, but being able to measure and adjust as you go is a necessity.

So, how do you calculate a projected ROI for your new website? Simple. You take an educated guess, then you launch, measure, figure out what's working and what's not working, adjust and repeat. Let's look at some of the factors that could come into play with this scenario.

Assumption: New website development cost is $10,000. Website will generate 5 new leads per month. With a closing rate of 40%, website sales will result in two new customers per month. The average value of a sale is $2000, so the website will generate $4000 in monthly sales. After 3 months, there will be $12,000 in sales attributed to the website. With a 20% profit margin, there will be $2400 in profits after 3 months from web sales.

Reality: New website costs $10,000, as budgeted. Website generates 2 new leads a month. After 3 months, there are 3 new clients, representing a closing rate of 50%. The average value of those sales is $1000, resulting in $3000 in revenue. The profit margin on these smaller jobs is only 10%, so there is a $300 profit from web sales after 3 months.

What Do You Do?

Nobody's happy when a website doesn't perform. Customers aren't happy. Developers aren't happy because their customers aren't happy. People who genuinely need the product or service being offered aren't happy either, because they aren't getting what they need. What to do?

There are many things that can be evaluated and tweaked to make a website perform better. Here are a few thoughts.

  • What is the website's reach? Are enough people coming to the website? Google Analytics is your friend here. If people aren't coming to your website, you can't expect great things from it. If you're expecting your website to convert visitors into leads, you have to make sure there are enough visitors coming to it. What can you do? Buy advertising. Better your SEO. Do content marketing - and market your content through social media and other channels.
  • How is the website converting? If 100 people come to your website every month and five people make a sales inquiry, your conversion rate is 5%. What if your conversion rate's only 1%? You'll need 400 more visitors to make up the difference. What can you do? Have better website content. Improve your CTA (Calls to Action). Make sure you're reaching your target audience. Ensure your website design, or site loading times or other on-site factors aren't turning people away. 
  • How is your sales staff converting? Unless your website is purely and e-commerce site, your sales staff are the ones converting leads from the website into customers. The website has done its job and pre-sold your product or service to a prospective customer. Now it's your sales staff who need to perform. Are they doing a good job? Do they have the tools they need to succeed? Did the website do such a good job that all your staff need to do is take the order or is there still a hard sale ahead? What can you do when sales staff don't perform? Invest in better training, systems, or people.

There's another factor to take into consideration with the above scenario. What if you didn't spend $10,000 on a website? What would you have done with the money? Would that have been money you didn't have to borrow? Would it be money you could have invested in other revenue-generating activity? While it's generally agreed that most businesses need a website, it's also true for some businesses that it's really not necessary for their success. It is possible for a business to have an online presence that's completely based on social media presence and exposure, but those businesses are the exceptions, not the norm. In the above scenario, there could also be a financial and psychological cost of not having a website. These things are difficult to measure, but not impossible.

As the title of this article suggests, this is part 1 of a discussion of how to measure ROI from your online marketing efforts. If you have questions or comments, I look forward to hearing from you. Your contribution to the discussion is appreciated.



No Finish Line

Mark Kawabe - Wednesday, November 09, 2016

There is no finish line in marketingMarketing is not a race. If you are in business, you should know and understand that marketing is a continuous process. If there is an end to marketing, there is also an end to revenue growth, new customer acquisition etc.

When it comes to marketing online, I've met a lot of business owners who have an online presence, but who aren't happy about it. They have "tried everything" from SEO to social media and nothing's worked, from their perspective. They're tired of the cost, and they're frustrated by the lack of results.

To be fair, that's a very reasonable outcome. If I asked you to spend $5000 and not have any measurable return on investment (ROI), you'd probably walk away. I would too.

The word "measurable" is important though, because you CAN measure many, many things when people are interacting with your online presence. On your website, you can use your analytics to see what people are clicking on and how they're coming to your site. You can use heat mapping to see where people are focusing their attention. Any reputable email marketing software will tell you your open rates and track what people click on in your messages. Social media tools give you metrics showing you what posts got the most attention.

Then the hard work begins. Analyze. Investigate. Uncover reasons. Ask questions. Tweak your site, your content, your next post, and then do it all over again. If you want better marketing, you need to have a better system.

Nobody can say for certain that creating and implementing a robust inbound marketing plan is going to be a goldmine of lead generation. However, it is true that not doing anything will very likely be worse for your business' lead acquisition. Even if you put together a plan and start implementing slowly, you'll be better positioned a few years from now.