12 Metrics For Calculating Digital Marketing ROI and How to Find Them

In my previous post about calculating Digital Marketing ROI, I introduced a few metrics that you needed in order to figure out the impact of your marketing efforts. Here we will dive a little bit deeper into those metrics, how to find them, and how to put them to good use.

Types of Metrics (Bottom-line vs. Key Performance indicators)

I’ve split the metrics into two separate groups. “Bottom-line” metrics are directly tied to your business performance. You’ll likely need to leave your marketing analytics platform to find these. The other group is Key Performance Indicators. These are metrics that, while not tied directly to business outcomes, indirectly impact sales.

Bottom-line Metrics

The following eight metrics directly impact your business and are essential for that actual calculation of your digital marketing ROI. You’re like going to need input from your sales team, a Customer Relationship Management (CRM) software, and accounting. These metrics are directly tied to revenue, costs, or profitability. Where possible, I’ll share how I pulled these numbers for Top Floor to give you a sense of what’s involved.

Leads Generated

The first step in understanding the effectiveness of your digital marketing is to know how many leads these channels have captured. This sounds simple but can get quite complicated. Make sure you have a system to track the leads. This can be as simple as a spreadsheet or, better yet, you could be using a CRM like Salesforce or Copper.

Whichever system you use, you’ll need to have an attribute that designates the lead’s source. Common lead sources include (but are not limited to):

• Email Marketing
• Organic Search
• Paid Ads
• Social Media
• Events (like webinars or seminars you host)
• Trade Shows
• Networking
• Referrals
• Prospecting/Cold Calls

Determine which of these metrics are tied to your digital marketing efforts and use these to calculate the number of leads generated.

Finally, you’ll need to get alignment within your company on how you attribute leads. As I’ve said before, marketing is omni-channel and rarely does one channel alone drive a lead, so choose how you’re going to give credit. I personally like a last-touch attribution model, assigning the last channel used prior to a lead reaching out for a quote. It’s less messy and easier to track in the long run.

Lead Close Rate

I define this metric as the percentage of leads generated that end up becoming customers. If you’re using a CRM, you should be able to run a report that shows sales closed and filter for the sources you’ve assigned to digital marketing. Take that number of transactions/won contracts and divide that by the total number of leads generated from digital channels to get your Lead Close Rate.

For example, if you generated 100 leads from marketing and 40 became customers, then you have a 40% Lead Close Rate.

If you do not currently have a system in place to track leads generated or their source, you’ll need to discuss with your sales team to determine your Lead Close Rate. This doesn’t have to be exact, but work to get it as close as possible.

Overall Revenue

An essential part of any measurement of business success is going to be the revenue that is generated. One way to look at it is the revenue that is the direct result of a lead becoming a customer. If using a CRM, there will be a report showing sales closed that you could filter to only include digital sources to get your revenue generated number. This number is useful if the nature of your business is more “one-and-done” or if you are just looking at immediate impact. If you’re looking for the true value of your marketing, then you’ll want to use the next metric.

Customer Lifetime Value

For most of our clients, once they get a customer, they work together for a number of years on many different projects. That means that the value of a new customer should not be limited to the first contract they sign, but rather the Lifetime Value. I recommend using an accounting software or team to figure this number as they’ll know how much was invoiced as contracts can change.

At Top Floor, we use QuickBooks, so a quick way to find this would be to run a Sales by Customer Summary Report looking at all dates, which gives me all sales made which I then divided by the total number of customers. That leaves me with the average amount invoiced to all customers, which can be used as my Average Customer Lifetime Value. Otherwise, you would need to find your Average Value of Sale, Average Number of Transactions, and Average Customer Lifespan. Multiply those three values together to calculate your Customer Lifetime Value. I think the first method is a lot easier.

I find this number to much more valuable in my calculations of ROI as opposed to only looking at initial contract values. If you’d like to take it one step further, you can factor in the next metric.

Gross Margin

Return on Investment is all about measuring the profitability of an action, which means that we have to account for the costs to produce the goods if we’re going to truly understand our return. If I spend $20,000 to get $100,000 in revenue, that may on the surface level seem like a good return. However, if I’m running a business in an industry with razor thin margins, say 20%, then this action is essentially a wash. I’ve generated more revenue, but I’ve wiped out all profits with how much I spent to get it.

Finding Gross Margin is relatively easy. Again, we use Quickbooks, so I just run a Profit & Loss report. I usually narrow the date range to the last year or so in order to get a more accurate picture of the current profitability of the business, this is also long enough to even out any outlier months. Then it’s as simple as taking your Total Income minus your Total Cost of Goods Sold (COGS) and dividing that by Total Income. That gives you the percentage of revenue that is Gross Profit.

Value of a Lead

For our clients that do not have ecommerce, knowing the value of a lead is a good substitute for a revenue number in marketing analytics platforms like Google Analytics. If you’ve been able to pull your company’s metrics so far, you’ll have everything you need to find this number. You take your Leads Generated and multiply that by your Lead Close Rate to get your total new customers. Multiply that number by your average Customer Lifetime Value to get the total Value of your new customers. Divide that by the total Leads Generated and you get the Value per Lead.

Let’s use some numbers to illustrate the point. You’ve generated 100 leads and your Lead Close Rate is 40%, this means you’ve gained 40 new customers. Your average Customer Lifetime Value is $25,000 meaning the 40 new customers are worth $1,000,000 in revenue. Divide that by the Leads Generated (100) and you’ve got each lead being worth $10,000 in revenue. It’s up to you if you want to take that a step further and multiply that number by your gross margin, that would tell you how much profit is generated per lead. Just make sure you’re communicating if these numbers are revenue or profit when doing your reporting.

Bonus: When you’ve figured out the Value of a Lead, you can actually add that number into Google Analytics so it can report on not only how many leads were generated, but the total value of those leads. When setting up Conversion Events, you can add a default conversion value. This is where you’d put your calculated Value of a Lead.

Total Cost of Marketing Activities

Tracking the total cost of your marketing is vital, but unless your internal team differentiates your traditional marketing expenses from digital, you’ll likely need to do some work to pull this number. Make sure to include all sources of digital spend and if you want, include the time spent by you and your team on digital marketing. Typical expenses include:

• PPC ad spend
• Social media ad spend
• Agency fees
• Digital components of tradeshow exhibits
• Advertising in online publications
• Email marketing fees
• Freelancer costs (if using)

Make sure that you’re using the same time period (Last X months, Last Year, etc…) when pulling each figure so the number is as accurate as possible.

Cost Per Lead

Once you have your Total Cost of Marketing Activities figured out for a given time, you can benchmark your Cost per Lead by dividing the Total Cost by the number of leads generated in that same time frame. This number will fluctuate over time, so I recommend checking this number once every six months to a year.

The number on its own does not have much value, however when you use the Cost per Lead for all of your marketing as a comparison to specific channels, you’ll be able to identify which activities are getting you the greatest return.

Key Performance Indicators

These are the metrics that most agencies (including Top Floor if I’m being honest) focus on the most, because these are the numbers that our activities directly impact. Where we need to get better as marketers is not just reporting on these Key Performance Indicators, but tying them to the Bottom-Line Metrics we just talked about.

Website Traffic

Website traffic is top-of-mind for me as my background is in SEO and this is a metric that gets put front and center in digital marketing conversations. The reason is pretty straightforward, a lot of what we do as digital marketers is designed to get more people to your website. But speaking as a business owner, more traffic is great as long as it is leading to more leads.

To increase the impact of reporting on traffic, use these tips:

1. Identify traffic trends to different page types. Not all pages are created equal, there are transactional pages (I like to call them money pages) that focus on your services or the products you sell. If overall traffic trends are down, looking at the metrics of your money pages will reveal the true impact on lead generation. If you’re just losing traffic to your blog, then it might not be an issue.
2. Interpret the quality of traffic from other engagement metrics. If I increased traffic to your website from 1,000 per month to 10,000 per month that’s great right? What if you’ve seen no change in the number of leads generated? Or what if all those new users leave your website right away and don’t engage? Traffic on its own does not tell a complete story.
3. When comparing against past performance, look at the same time the previous year. This helps avoid any issues with seasonality in the business, holidays, or shorter months.

Conversion Rate

Conversion Rate is the perfect metric to pair with website traffic to determine the quality of new users to your website. Your conversion rate is the percentage of users that come your site and complete a desired action (filling out an RFQ, completing an ecommerce transaction). An influx of traffic to your website is only successful if you’re able to maintain, or improve upon, your conversion rate.

You will need to set up which conversion events you want to track within your Web Analytics platform, like Google Analytics. I would recommend limiting your conversion events to things you would consider a lead or having a more direct impact on your business. Things like “time on site” or “link clicks” are good engagement metrics, but I would hesitate to track those as conversions. Even things like Newsletter Signups, Event Registrations or Document Downloads may muddy the waters. 

If you are tracking those types of events, make sure to take advantage of the conversion value feature in GA4 to add more weight to your hard leads (RFQs and Contact Forms) and less weight to your soft leads (Newsletter Signups and Event Registrations).

Keyword Rankings or Average Position

In order to track this metric, you’ll either need to invest in a keyword tracking tool (SEMRush, Moz, or ahrefs to name a few) or you can use the Average Position metric in Google Search Console’s Performance Report.

Keyword rankings are another topic that gets a lot of focus because if you rank well for a given keyword, you will likely get more traffic (see above). So we are now, at least, two steps removed from having a direct impact on your business. Aside from the challenges of assigning value to that type of metric, there’s the variance in what a keyword ranking means.

Every day there are over a billion searches conducted on Google are brand new, meaning that it would be impossible to track all of the keywords that are used to get to your site. You may only rank in the top 10 for “blue widget” but for the search “blue widgets for agricultural equipment used primarily in desert climates” you may be the top result. A keyword ranking metric isn’t going to capture that.

Use these as a benchmark to track progress on the work you’re doing to certain page, but also use that page’s metrics (traffic, conversion rates) to get a more complete picture.

Impressions

Impressions is used a lot in the PPC world as it is a measure of how many times your ad was shown. It also applies to organic searches and you can find your impressions in Google Search Console as well. If the goal of your marketing is brand exposure and recognition, then impressions is the metric for you. However it loses some value as a standalone metric when discussion lead generation.

To provide context and additional weight to your discussions on Impressions, you can focus on keywords that have historically converted leads well. You could also filter for keywords that have a clear buying intent (including words like “buy” or “for sale”). 

Tips For Putting These Metrics to Good Use

You should now have a pretty firm grasp of how to find these metrics and what they mean. Now what? Here are some tips for putting these metric to work for you:

1. Start with benchmarking – figure out your numbers today to understand how your marketing is currently performing so you can evaluate if you’re moving in the right direction when you check the numbers down the road.
2. Begin at a high level – if you’re new to this and you start by trying to figure out the ROI of a specific LinkedIn post you boosted, you’re going to fail and get frustrated. First figure out your overall marketing performance and once you feel confident in those numbers, drill down into things like specific channels.
3. Provide context – numbers on their own are meaningless. Use your newfound knowledge of these metrics and how they interact with one another to tell compelling stories about your marketing performance.