A Super Simple Guide to Measuring or Improving your Digital Marketing ROI
The team at WebFX put together a very quick and to-the-point article covering how to measure your digital marketing ROI.
You can read the full article here.
Or if you’re time-strapped, we coaxed our local LLM into outputting an even quicker and even simpler version that’s extra skimmable…
What is ROI in digital marketing?
Digital marketing ROI shows whether your online marketing is making money or losing it.
Digital marketing ROI formula
- ROI = (Net Profit / Total Digital Marketing Costs) x 100
How to use it:
- Total your marketing costs
- Work out net profit
- Divide profit by costs
- Multiply by 100
ROI example in £
- Total costs: £5,000
- Revenue: £30,000
- Net profit: £25,000
Calculation:
- (25,000 / 5,000) x 100 = 500% ROI
ROI ratio (instead of %)
- £25,000 / £5,000 = 5
- ROI ratio = 5:1
Meaning: £5 back for every £1 spent
Two alternatives when you can’t use net profit
Common reasons: no quick profit data, or you need forecasts for approval.
1) Forecasted ROI
- Forecasted ROI = ([Forecasted Return – Marketing Costs] / Marketing Costs) x 100
Example:
- Forecasted return £30,000, costs £5,000
- Result: 500%
2) Forecasted ROI for lead gen
- Forecasted ROI for Lead Gen = (Forecasted Leads x Lead-to-Customer Rate x Average Sale Price)
Example:
- 25 leads, 50% close rate, £1,000 sale
- Result: £12,500
What is a good ROI?
Benchmarks found by WebFX:
- 5:1 is good for most businesses
- 10:1 is excellent
- Many need more than 2:1 to cover marketing plus delivery costs
What changes your target ROI?
Your margins matter:
- Lower margins usually need higher ROI to break even
- Higher margins can profit with a lower ROI ratio
