How To Demonstrate ROI On Your Paid Media Advertising
Marketers spend a lot of their time thinking about ROI. While measuring your digital performance isn’t always the easiest of tasks, it’s well worth the effort. Proving ROI can tell you whether you’re getting your money’s worth from your campaigns and if not, how to improve them.
Paid media advertising has many forms including search, social and display. To really understand what revenue you can attribute to your paid media efforts, you need to know which tools, channels and strategies are performing and which aren’t.
Why should you demonstrate ROI?
Reporting on ROI enables you to communicate with those that matter most – your stakeholders and the wider business. If your paid media activity is profitable, it will be deemed successful, opening the doors for greater investment and even better performance.
When management comes a-knocking and wants to know the impact of their paid media investment, you need to be ready. How? By having the data available that clearly shows how far this investment is going. That’s why you need to be able to prove the value.
So, how is this done? ROI is the measure of all your paid media activity that creates value, divided by the investment you put into achieving it. Here’s a simple formula to follow:
Value / Investment X 100 = Paid Media ROI %
Proving ROI starts with well-defined goals
To prove an ROI, you need to be clear on what return you’re looking to generate. Is your aim to build brand awareness? Are you trying to drive leads? Do you want to boost revenue? Understanding exactly what your business objectives are, what value means to your business and how your conversions fit within this is the best place to start.
If you can confidently tell management, “Our aim is to increase revenue by 15 percent and here’s how paid media advertising will contribute to that”, it will be a much more compelling case for investment.
Once you’ve pinpointed clear objectives that link your paid media ROI directly to real business results, it’s time to set goals on exactly how and when you plan to get there.
The metrics that matter
The metrics that matter to you will be led by your objectives. Understanding how well your campaigns are performing starts with understanding which metrics you should measure.
By focusing on the right metrics, you’ll have a true understanding of what each metric really means, the value it brings to your business and, in turn, you’ll be able to clearly communicate performance with management.
However, paid media is jammed packed with jargon. Here’s a list of some of the most common (but by no means exhaustive) metrics you’re likely to come across:
Impressions
The number of times ads have appeared in the paid search results or the total number of times your display ad was shown on a third-party site.
Impressions are a good way of calculating brand awareness. But remember, impressions don’t necessarily mean a user saw your ad, it just means your ad was displayed.
Clicks
The number of clicks your ad has received. Multiplying this number by your average cost per click (CPC) will show your total cost. Or divide it by your impressions to get your average click through rate (CTR).
Conversions
The number of times an action that is defined as a conversion for your business has been completed following an ad being clicked. This could include completion of a contact form, a purchase or a click to call to name a few examples.
Click-through rate (CTR)
Your CTR is the percentage of impressions that are turning into clicks. This metric varies by vertical and account type but a good CTR is the foundation for a high performing campaign.
Conversion rate (CvR)
This is the rate at which a click results in a conversion – the higher, the better!
Cost per click (CPC)
Your CPC is the amount you pay every time a user clicks your ad. Your maximum CPC is the maximum amount you’re charged for a click.
Cost per lead (CPL)
This is quite simply the spend behind your ad divided be the number of leads generated.
Cost per acquisition (CPA – or cost per conversion) (CPA)
Once you begin tracking conversions, you can derive the cost per acquisition by dividing the total cost of the campaign by the total number of conversions for a given date range.
Revenue per lead (RPL)
To calculate this metric, take your revenue generated and divide it by the number of leads generated.
Return on investment (ROI)
This is the amount of profit made in comparison to your total cost of promotion – don’t forget to include all spend within this such as your resource, media spend and agency fees.
Return on ad spend (ROAS)
ROAS help you understand the return on ad spend from specific ad campaigns. This differs from ROI which covers the full marketing picture. By taking total campaign revenue and dividing it by total campaign cost, you can figure out your ROAS.
Bounce rate
This metric measures the percentage of users who land on your website, perform no action and then leave.
Google calculates bounce rate as single-page sessions divided by all sessions. Or the percentage of all sessions on your site in which users only viewed a single page and triggered only a single request.
A high bounce rate can indicate a few things, namely the quality of page is low and doesn’t encourage engagement or the audience doesn’t match the purpose of the page.
Social media advertising
When it comes to social advertising, there are a number of additional engagement metrics which you will no doubt be familiar with such as likes, shares, comments and saves. Often referred to as ‘vanity metrics’, it can be difficult to understand what these really mean to your business.
The relevancy of these metrics heavily depends on your objectives. For example, if your goal is to increase brand awareness, these could well be the right metrics for you to report on.
The importance of accurate tracking
Your reporting will only ever be as good as the data you record. Accurate tracking needs be set up correctly to ensure the insights they provide are as true as possible.
When it comes to tracking your paid media efforts, make sure your AdWords and Google Analytics accounts are set up properly. Your paid social campaigns should also be a part of this. Social platforms have significantly grown and with it, their reporting and analysis functionalities have become all the more impressive. However, Google Analytics can also add even more value here.
Google Tag Manager is a handy tool for managing multiple tracking codes on your website. This analytical tool will allow you to measure the effectiveness of your social advertising by understanding the actions people took on your website.
The role of attribution in proving ROI
Attribution modelling helps you create an accurate representation of the financial return of your paid ads. Connecting the dots between your digital marketing efforts, you can see which parts are working well so budget can be redirected to the most valuable channels.
By considering attribution, proving ROI can be made a whole lot easier, allowing you to accurately report on the performance of your paid media advertising.
However, with six Google Ads attribution models currently available – last click, first click, linear, time decay, position-based and data-driven – it’s important to choose a model that best fits your objectives. Find out more about attribution modelling and which model may be best suited to your business.
Over to you!
Demonstrating the ROI of your paid media advertising is a must if you want to gain approval and further investment from stakeholders. We know a lot about helping businesses prove and improve their ROI, if you need a hand getting more from your paid media budget, get in touch with our team.