Dec 27 2020 07:12:39 / By Saiyed Mehdi

Digital marketing is quickly becoming the mainstream mode of marketing for companies selling a variety of products and services across the globe. Most people who do digital marketing on a large scale, focus on trying to create viral and engaging content. While it is true that digital marketing relies on these elements, they do not tell the entire story.

The truth is that digital marketing can be magical for your business provided that you monitor, measure, and tweak it constantly based on certain metrics. You must try to quantify your efforts and campaigns to understand what works well and what doesn’t. One of the best tools to measure the success of your campaigns is by calculating the return on investment, more popularly known as ROI.

Understanding ROI

By definition, ROI is a ratio of the profit that has been generated from a particular digital marketing campaign, and how much it cost to create it. This ratio is then converted into a percentage. The goal for any business is to have as high an ROI as possible, for better growth and higher revenue.

Metrics Used

Here are some of the most common metrics used in Digital marketing in order to calculate the ROI.

Return on Ad Spend (ROAS)

Return on ad spend (ROAS) is the metric that runs campaign based on the amount of gross revenue your business earns for each dollar spent on digital advertising. For businesses that use various marketing channels including digital advertising among others, understanding the ROAS will help determine how to achieve the highest return on online marketing for every ad dollar spent.

Cost Per Lead (CPL)

In many digital marketing campaigns, the goal is to generate new leads for the sales team to pursue. In such cases, it becomes crucial to measure the amount being spent to obtain each lead. To calculate the cost per lead, just divide the total amount spent on ads by the total leads generated. If you see that the revenue generated from each lead is higher than the cost per lead, then there is no positive ROI.

Cost Per Acquisition (CPA)

Similar to the previous metric, Cost Per Acquisition refers to the average cost needed to acquire a new customer. In order to measure the Cost Per Acquisition, divide the total advertising amount spent by the total conversions made. Just like with CPL, if you are spending more money to acquire a customer than the revenue they bring to the business, it is time to re-evaluate.

Customer Lifetime Value (CLV)

Another incredibly useful measurement to understand ROI is Customer Lifetime Value. CLV indicates the amount spent on average by a customer during their lifetime association with your business. In addition to the initial customer acquisition costs, CLV will help you have a better picture of the value of each customer.

For example, assume that you need to spend about $50 to acquire a customer. If they make a single initial purchase for $30, you are still left with a negative ROI. However, if they go on to spend $50 every month henceforth for the next 2 years, then your investment to acquire the customer was well worth it! The ability to see beyond the initial purchase of a new customer is critical in obtaining the correct ROI for your campaigns.

Average Order Value (AOV)

AOV is used to measure the average amount of money spent when a customer places one order. In order to calculate AOV, divide the total revenue generated by the total number of orders.

While increasing the number of orders placed must take priority for any business, it is also important to be aware of the average value of each transaction. A tiny increase in the average value can pay dividends and result in thousands of dollars of increased revenue. In many cases, AOV can be improved by providing a better experience to users or utilizing cross-selling opportunities.

Improving Your Marketing ROI

Once you have accurately quantified your ROI, you must look for areas of improvement.

Identify Goals

Before even calculating your ROI, you must be clear about the objectives and goals of your digital marketing campaign. Otherwise, you will not be able to track the right metrics. Avoid setting vague goals such as ‘increase conversions’ or ‘create better awareness’. It is important that you are very specific. Instead, set a goal such as ‘Increase conversions by 15% over the next 6 months’.

Identify KPIs Specific to Your Goals

Next up is choosing KPIs that are in line with your objectives and goals. The KPIs for email marketing will be different from that of SEO. Without some KPIs in place, you will not know how close or far away you are from hitting your targets.


As with all other types of marketing, testing is a vital part of the process. Running A/B tests on the various aspects of your campaign will indicate what exactly gives better results. Everything from PPC ads to email marketing and SEO can benefit from rigorous testing. Be sure to test every element one by one, while keeping all other variables the same for the best results.

Final Notes

This article provides a brief idea about marketing ROI and the various metrics that it utilizes. There are several other factors that play a role in ROI, such as the industry, audiences, size of the company, and so on. As an ROI-Driven Digital Marketing Agency, Wisoft offers a cohesive plan that factors in the various KPIs along with these simple tips, to help you get the most out of your marketing budget!

Digital Marketing Agency in Dubai