Even the most compelling marketing campaigns can feel like a one-way street. You may spend hours designing the perfect email campaign or snapping beautiful product photos for your Instagram account. But once you share your content, it’s not always easy to see the impact. You may wonder, “Is my hard work helping my business, or am I wasting my time?”
Tracking your return on investment (ROI) is one of the best ways to measure your performance. This metric shows how much value you’re getting from your campaigns compared to how much you’ve invested. Think of it like using an expense tracker — you need to make sure you’re not spending more than you’re earning.
This article answers the question, “How to measure return on investment?” It also shares practical strategies for improving ROI so you can get the most out of your marketing campaigns.
What is return on investment (ROI)?
Return on investment compares the benefits of an investment to the amount spent. Businesses use this measurement to determine whether they’re using their resources effectively or need to change tactics.
Marketers often rely on ROI to assess how their efforts impact their company’s bottom line. A high ROI means your campaign has generated significantly more than what you put in. Meanwhile, a low ROI suggests that you’ve either overspent or your campaign hasn’t earned enough.
The ROI meaning can also cover intangible benefits, such as:
- Building brand awareness
- Entering a new market
- Improving customer loyalty
- Reinforcing brand authority
- Saving time by using a new marketing tool
What does return on investment look like for email marketing?
Maybe you’re looking for new ways to promote your brand without spending a fortune upfront. Email marketing can deliver impressive results with minimal investment. This cost-effective approach has an average ROI of $36 for every $1 spent.
Choosing an affordable email marketing tool can help you maximize your ROI. Constant Contact offers flexible pricing tiers, starting at $12 per month. The platform has many convenient features, including customizable templates and an artificial intelligence-powered content generator. These tools help boost your ROI by reducing — or maybe even eliminating — the need to pay for graphic design or copywriting services.
Plus, email marketing can provide significant intangible benefits. Constant Contact lets you personalize messages for each client, strengthening your relationships. Sending professional emails with valuable content also highlights your expertise and improves your brand reputation. These advantages may not directly translate into immediate sales but contribute to your business’s long-term success.
What does return on investment look like for other digital marketing channels?
While email marketing can have a high ROI, it shouldn’t be the only strategy you rely on. Some customers won’t sign up for your mailing list, while others may prefer different communication channels. Diversifying your digital marketing strategies will help you connect with more customers and boost engagement.
Here’s a quick breakdown of three popular digital marketing channels and their return on investment.
1. Website ROI
Every business needs a professional website. It’s the go-to spot for everything you want to share about your brand, from contact info to product descriptions and helpful resources.
Website ROI compares your website’s revenue to how much you’ve invested. Many factors influence website ROI, including:
- Conversion rate
- Cost to build and maintain the website
- Industry
- Product pricing
- Search engine optimization (SEO)
- Website traffic
Say, for instance, you spend $6,000 building an ecommerce website and optimizing its content for better search engine visibility. After two months, you’ve made $12,000 in sales. You’ve effectively doubled your investment by earning back 100% of the money you’ve spent.
2. Social media ROI
Social media has become an essential marketing tool for businesses of all sizes, from mega-corporations like Walmart to one-person shops. This channel allows companies to engage customers and share valuable content related to their brands.
In a 2023 Statista survey, marketers reported that these platforms have the highest returns on investment:
- Facebook (29% of respondents)
- Instagram (29%)
- YouTube (26%)
- TikTok (24%)
- LinkedIn (16%)
- X (16%)
It’s important to note that the cost of social media marketing can vary widely, which will affect your ROI. Simple Facebook and Instagram posts may only take a few minutes to create and schedule, especially if you’re good with a smartphone camera. While this content may not lead to an immediate sales surge, it builds brand familiarity and encourages audience engagement.
On the other hand, influencer partnerships can take weeks to plan and often involve hefty fees. However, influencer marketing is still generating a significant return with an average ROI of $5.20 per $1 spent. Essentially, the higher the investment, the greater the potential rewards — especially when collaborating with high-profile influencers with loyal followings.
3. SMS ROI
SMS marketing involves sending promotional messages directly to your customers via text message. It’s a fast and personal way to connect with your audience, even when they’re on the go.
Like email marketing, SMS enables you to promote your brand in a budget-friendly way. This channel has an average ROI of $21 to $40 for small and medium businesses. The best part? You only need a smartphone and an SMS marketing tool like Constant Contact to get started.
How to calculate your ROI
At this point, you’re probably wondering how to measure ROI effectively. There are two ways to calculate this metric: manually or with a tool.
ROI formula
You can calculate financial ROI using this simple formula:
[(Net return – amount spent) / amount spent] x 100 = ROI
If you spend $100 on your email marketing campaign and generate $2,500 in sales, your ROI would be:
[($2,500 – $100) / $100] x 100 = 2400%
In other words, for every $1 you invested into your email marketing campaign, you earned $24 in sales.
Tools for measuring ROI
Many websites offer return-on-investment calculators for marketers. These tools simplify ROI calculations by letting you input specific earnings and expenses. This process minimizes the risk of human error and increases the accuracy of your ROI measurement.
Platform-specific tools can also provide valuable insights into intangible returns on investment. For example, Google Analytics tracks conversion rates, website traffic, and other engagement metrics. This data can help you measure your campaign’s impact on brand awareness and sales.
Similarly, the Meta Ads Manager allows you to assess customer demographics and engagement levels for pay-per-click ads. Analyzing this data will deepen your understanding of your campaign’s performance and target audience.
Benefits of calculating return on investment
Measuring ROI is about more than just counting your profits. This metric has many advantages for your marketing team and overall business.
Most obviously, calculating ROI will help you understand which marketing strategies are working and which aren’t meeting your expectations. For instance, you might discover that one email marketing series has an average ROI of $27, while another only earns $3 for every dollar spent. Based on this finding, you could compare the campaigns’ images, messaging, and other elements to see what makes one more successful.
Insights like these are key to refining your campaign performance over time. You can apply the lessons you’ve learned from previous successes to improve future campaigns and continuously grow your ROI.
Do interactive emails typically generate the highest returns? Include more polls and games in your promotional messages. Are emails with pun-tastic subject lines always a hit? Break out more dad jokes to keep your audience hooked. This data-driven approach enables you to tailor your content to your customers’ preferences and consistently get positive results.
Plus, monitoring ROI helps you use your resources more effectively. By quickly identifying underperforming campaigns, you can adjust your strategy or pivot to a new channel. That way, you won’t waste your limited time and money on unprofitable projects.
Potential limitations of measuring ROI
While calculating ROI offers numerous benefits, it does pose several challenges.
The inability to precisely measure intangible outcomes is one of the biggest obstacles. While you can easily count sales, many benefits are much harder to quantify. For example, you can’t plug brand recognition or customer loyalty into a calculator. However, you can address this challenge by using stand-in metrics — such as social media mentions and retention rates — to estimate the impact of your campaigns.
The customer journey isn’t always straightforward. For example, a customer might watch your Instagram post on Monday, mull over their purchase decision for a few days, and then buy a product on Friday. Or they may see influencer content and paid advertising for your brand but not make a purchase until they receive a coupon in their email.
This complexity makes it difficult to pinpoint which part of your marketing campaign had the most significant impact on ROI. Luckily, attribution modeling can provide valuable insights. This process involves analyzing how different touchpoints lead to conversions so you can accurately calculate ROI.
Strategies to improve your return on investment
Once you’ve calculated your baseline ROI, you can take steps to boost your campaign performance. Here are four effective ways to increase your returns:
1. Prioritize the most successful platforms
You may be tempted to market your brand on every available channel, but an overly broad approach can exhaust your resources — and put your marketing team on the fast track to burnout. Instead, focus on the channels that deliver the highest ROI. This strategy will boost productivity and allow you to engage customers where they’re most receptive to your messaging.
2. Personalize your campaigns
No one wants to view generic or irrelevant marketing content. Deliver more value to your customers by tailoring your campaigns to their unique challenges or interests.
Constant Contact makes it easy to personalize your email campaigns with dynamic content. This could be as simple as using each customer’s name in the subject line — “Hey Robin, we’ve got a deal for you!” — or offering personal product recommendations.
If you want to take it a step further, you could customize the images and the body of the email. For example, parents might receive emails with photos of happy families using your products, while pet owners see adorable animals.
Personalization can have a significant impact on ROI. According to a 2024 Deloitte Digital report, brands that embrace personalization increased their conversion rates by 54%, while less mature brands saw only a 38% improvement.
3. Use A/B testing to improve performance
Don’t rely on your gut to tell you which marketing strategies work best. A/B testing lets you try out different versions of your emails to see which ones get the best results. For example, you could send one group an email with a witty subject line while another receives one referencing a viral TikTok meme. You can determine which approach has the greatest ROI by comparing how each performs.
4. Look for opportunities to cut expenses
Let’s be honest: It’s easy to splurge when designing a marketing campaign. Maybe you went overboard buying top-of-the-line camera equipment — in an attempt to get the perfect social media photos — or perhaps an influencer negotiated a higher rate than you expected.
While some expenses are unavoidable, too many can eat into your ROI before your campaign even launches. Avoid this issue by looking for creative ways to reduce costs without sacrificing quality. For instance, consider buying gently used equipment or collaborating with an influencer with a small but enthusiastic audience to save money.
Get ready to boost your ROI
Return on investment is a critical metric for businesses in all industries. This key performance indicator will help you track progress and focus on the most successful marketing strategies.
Take the next step by using data analytics tools to measure your current ROI. Once you’ve identified your campaign’s strengths and weaknesses, experiment with personalization and other targeted strategies to improve the customer experience and grow sales.
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