Every businessman knows or at least has heard about this calculation. This is one of the most important metrics for an administrator or marketing specialist.
With the information provided by the ROI, it is possible to assemble an investment strategy for various marketing actions, including in the online environment.
But do you know how to calculate ROI for digital marketing campaigns? Don’t worry, we’ll explain how to make this account correctly.
Learn to do a custom calculation
As you’ve seen, ROI is a calculation for anyone looking to measure the financial return (or lack thereof) in campaigns of all kinds.
And when a company decides to invest in digital marketing, there is always the question of how to calculate the ROI for these specific actions.
That’s why it’s important to understand how the investment calculation can help you measure the size of your gain with a certain online action.
With it you can measure any data, from how much was the return on investment to the engagement of your customers with your campaigns.
This is why in-depth analytics, coupled with A/B testing, are so important.
An A/B test is responsible for presenting versions of the same page, but with small and random variations for users.
Then he metricifies which of the options presented a better result.
But what good is the detailed analysis tied to A/B testing and ROI calculation?
You may have already invested in digital marketing actions on social networks and in labor to improve your company’s communication sector.
If you haven’t invested yet, but you are investing in the online environment, you will certainly get to that point at some point.
And therefore, it is important to know how to calculate each of these strategies. So you will know what is being profitable or a loss for your business.
Even calculating each share separately is what will bring a real picture of what the results of your investments are.
How to calculate ROI on social networks?
The ROI calculation is basically the ratio between the investment cost of an online campaign and the gain it brought to the company after a certain time.
To learn how to calculate the ROI of social media actions, it is necessary to use the return on investment formula.
The ROI equation is as follows:
ROI = (revenue – cost / cost) x 100
To understand better, let’s consider the following situation:
Let’s assume that you invested 100 in Adwords, Instagram’s paid advertising platform, for your company. After a certain time, this ad brought a gain of R$ 1,000 in product sales.
The calculation for how to calculate the ROI in this case would look like this:
ROI= (1000 – 100 / 100) x 100
In this case, your Instagram ad spend gave you a 900% return. That is, for every 1 real invested, you receive R$ 9.00 in profit.
Sounds simple doesn’t it? However, there are several data that need to be analyzed before reaching the real profit of the campaign within the digital environment.
For example, you boost a post on facebook to bring more visibility, this ad will bring you visualization data, right? But how is it possible to calculate the ROI with this data?
It is necessary, first of all, to use some other calculation metrics, such as CPC, CPM, CPA to learn more about these metrics, access our content and clear your doubts.
But why do I need all this data? Simple! ROI can only be calculated with campaign billing, that is, you must use REAL ($) as the default unit of measurement.
Basic rule of math, right?
Therefore, our first step is to find the billing of the campaign that we carry out and for this the CPA, CPC and CPM metrics will be valuable tools.
Let’s practice!
Imagine a tourism company that wants to generate more sales through paid strategies on social networks, but starts its investments with outreach campaigns.
The data generated from this campaign are metrics only for the number of views the publication received.
The company’s CEO is still wary of investments in social media, so the marketing director’s mission is to show the ROI of the campaign, making it clear that this investment is capable of bringing great returns to the company.
It has the following data to build your report:
Investment value: 1,000.00
Publication reach: 5000 impressions
Link clicks: 50
How can we get to the actual campaign revenue with data only from reach and link clicks? Easy, just turn this into click-through conversion and then customer conversion.
But first we need to start calculating the CPM, cost per thousand impressions, for that we just need to apply the formula.
Basically, for every R$200 you get 1,000 views.
The next step is to calculate the percentage of clicks per views, for this we will recap some previous data.
Remember that one of the three data he had was the number of clicks on the link? So now we need to use that number and find the percentage of clicks per impression.
If for 5000 impressions, the campaign generated 50 clicks, the famous rule of 3 must be applied:
Click Conversion Percentage = (50×100) /5000
Click Conversion Percentage = 1%
This means that for every 1000 views, 1% of users click on the link.
Applying this to the previous data, for every R$200.00 spent, 10 users click on the link.
Okay, but what’s the next step? This is still far from calculating the ROI…
Calm down, now we’re getting close!
Of those 10 users, we need to know how many converted and actually became customers.
In the case of the tour company, we need to know which of these 10 users clicked on the link and booked the travel package.
We can get this data through Google Analytics, remember we said that this would be essential to calculate the ROI? Then!
In this scenario, of the 10 users who clicked on the link, only 1 closed the travel package, so I have a 10% conversion rate into a customer.
Now let’s put the facts together and finally get to campaign revenue to calculate ROI.
Okay, if for every R$200.00 I get 10 users who clicked on the link and only 1 of them made a purchase, I just need to calculate this data for my investment.
Investment / investment per thousand x average ticket = BILLING
(1000/200) x 800 = 4,000 in revenue
Now just calculate the ROI
(revenue – cost/cost) x 100 = ROI
(4000 – 1000/1000) x 100 = 300%
What ROI is this huh? Congratulations, you just learned how to calculate the ROI of any digital campaign.
Of course, the data can be different, but the reasoning is the same, you just have to break down the data until you find the real value obtained from each campaign.
It is worth remembering that we used fictitious data, because if all campaigns were like this, everyone would only invest in social networks.
As you already understood how to calculate ROI, check out the two main analysis tools for social media campaigns and get to work!
Google Analytics
Google Analytics is an excellent tool for analyzing the behavior of consumers who are directed from social networks to your web page.
With it, it is possible to measure from what were the conditions that generated sales to how many visitors converted into customers, factors that directly influence your revenues, therefore, in the calculation of your ROI as well.
If you want to know better how this tool works, take a look at our content on Google Analytics and understand more about it!
facebook ads
The tool offered by Facebook for companies to sponsor their posts on the social network also offers a very detailed report of information related to the campaigns made.
It is these data that allow you to correctly calculate your ROI.