Measuring Internet Marketing ROI

Measuring ROI - cont'd

Question 3: How many times did you achieve that goal?

You know what your conversion goal is, from question 1. Now you need to know how often you achieve that goal. To do that, you need four basic metrics:

Landings on a specific page or file. You can measure the number of times a specific page or file is viewed using any basic web site traffic analysis software - think of WebTrends, Urchin or Webalizer.
Where your site visitors come from, or referrers. Again, any basic web site traffic analysis software can provide this.
Conversions. Some ad networks, like Google Adwords, provide built-in conversion tracking, so you can tell which ads generate value and which don't.
Source of each conversion. And, if you're really on the ball, you're using software such as Urchin™ to measure conversions generated by every advertising asset: Ads, search engine keywords, e-mail newsletters, and so on.

If you're selling stuff directly, online, you'd use the four conversion metrics like this:

'Order confirmed' page was displayed 400 times; we had 400 orders.
30 of those orders came from Google Adwords Ad #3.
Those 30 orders totaled $4000, with a profit of $3000.
So Ad #3 generated $4000 in income, with a net value of $3000.

Or, if you're looking at leads:

Information request 'thank you' displayed 400 times; that's 400 leads.
30 of those leads came from Google Adwords Ad #3.
Those 30 leads have an average value of $250 each.
So Adwords Ad #3 generated $7500 in value.

Or, if you're measuring less tangible value:

Article viewed 400 times; 400 people saw our message.
30 of those views came from Google Adwords Ad #3.
That's worth a total of 150 points.
So Adwords Ad #3 generated 150 points.
But we see that, say, the e-mail newsletter generated 5000 points.
We know that the newsletter generated more value.

By the way: If you're working with a marketing consultant who knows this is a priority, and you don't at least have three out of four metrics available, fire them and find someone else. No exceptions - how can a consultant help you deliver effective marketing if they don't even know whether it's effective?

Question 4: What did it cost to achieve your goal?

Now you bring it all together. What did you spend to achieve your goal?

If you're collecting all three conversion metrics, you're set: Look at the value of each individual conversion in light of the cost of the advertising asset that generated that conversion:

Sale 1 generated $1000.
It came from Adwords Ad #3.
I spent $50 on clicks from that ad before I got this sale.
So I spent $50 to get $1000 in business.

Then average it out:
Sales from Adwords Ad #3 were worth $12000.
I spent $1000 on that ad.
I did pretty well, probably.

If you only know landings, referrers and conversions, you can still figure out general performance:

This month I received 400 visits from Adwords Ad #3.
Those vists cost me $50.
I didn't get those last month.
This month I generated an additional $2000 in sales.
Those additional sales came from the products promoted in Ad #3.
I didn't do anything else.
Chances are, Adwords Ad#3 generated most of those sales.

This isn't perfect, obviously. But you can at least determine which internet advertising assets are a total flop:

This month I received 400 visits from Adwords Ad #3.
Those visits cost me $50.
I didn't generate any additional sales this month.
Adwords Ad #3 isn't working.

It's better to know for sure, on a conversion-by-conversion basis, what's generating value. But even if you don't know that much, you can at least do a gut check and know which ads are ineffective. Armed with that knowledge, you can make changes and see whether those changes improve results.

Campaign, Know Thyself

There are many, many payoffs for basic ROI measurement.

First and foremost: You can measure which ads and campaigns generate value, and which don't.

The other benefits are almost as important, though. By gathering this kind of data over time, you can measure more than the effectiveness of individual assets - you can measure the effectiveness of whole marketing campaigns, and of different messages.

About Ian Lurie

Ian Lurie is an Internet marketing professional in Seattle, Washington. His firm, Portent Interactive, has helped businesses generate value using the Internet since 1995. Clients include Fairchild Bridal Group, Princess Lodges, Dessy and Alfred Sung.

Ian also publishes an Internet Marketing blog at conversationmarketing.com.

Feel free to reprint this article on your own web site, as long as you include the resource information above and a clear link to conversationmarketing.com. Questions? E-mail Ian at ian@portentinteractive.com.

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