Quantifying Your Digital Marketing ROI
Digital Marketing needs some clarity. $1,000 for SEO, a 15% management fee for PPC and Social Media Marketing and then $5,000 for a functional website…Sorry, what? For what? English please.
Pricing is one topic in Digital Marketing that has always been questioned. There are various ways in which agencies can price, either offering a higher value or lower price. However, how can you know what real ‘value’ they’re offering? The answer? Follow the money! Will I get more value going with the cheaper agency? Or more expensive agency? What is the true ROI that’s surrounding this project? Does your agency know how to calculate ROI? This will all be answered in this blog!
The first question you should be asking your agency is if they know how to calculate ROI, pause… if within 3 minutes they can’t explain exactly how they are planning on calculating ROI, dump them. For you to understand what a good ROI is relative to industry standards, you have to know what industry standards are. Lucky for you, they’re right below. If you were to invest $1 into the following services, on average, you would see on the following returns:
Email Marketing –$6.75
SEO – $2.75
SMM – $1.30
How do you actually calculate ROI?
Expected ROI = (Sales Value/Offered Cost)
If for example, you hypothesize an email campaign will generate 20 orders at $100/ product and this part of your digital marketing campaign will cost you a total of $250, your ROI would be ($2,000/250) or 8X. Looking back at the industry averages, an email marketing campaign should yield $6.75 for every $1 invested or 6.75X. As a result, you’re getting 1.25X more value than the industry average.
That’s great, but how do you calculate the sales value when the campaign hasn’t even started yet? Well that’s more intuitive and really depends on multiple variables, that’s why no good agency can tell you. If they do promise something, run… The Sales value can depend on:
Quality and competitiveness of the product.
How competitive the industry is altogether
How accurately conversions can be tracked.
The sophistication of the industry is as a whole
Just because an agency can’t tell you the specific ROI to expect, doesn’t mean they shouldn’t have a goal in place. It’s the agencies job is to make sure they analyze the variables and provide you with a ranged ROI so there is a common goal.
Now, when choosing an agency, it doesn’t matter who’s offering the cheaper or more expensive price, it’s about picking the right agency that knows your goals and knows how to achieve them.