Decision-makers, here are 3 ways to calculate your Digital ROI
The Digital Expert closed his presentation. He asked the President of the company if he had any questions about the digital strategy he had just proposed to him.
– It’s very beautiful what you tell me…, started the President. But what will be the return on investment if I follow your advice and invest in digital? How can I measure the Digital ROI?
– Let’s take the time to look into the subject, answered the Expert. There are 3 ways to measure digital ROI: opportunity cost, intangible values and media costs. Each method provides additional insight.
– I’m listening, said the President, starting to take notes.
– First of all, when we talk about digital return on investment, we must take this term in its broadest definition. This means that we must ask ourselves the question of the contribution of digital to the entire economic model of the company, and not only to marketing actions.
– That is to say ?
– Have you noticed that when you ask your marketing team the question of ROI, they often have the reflex to respond with indicators related to the performance of their campaigns: CPM, CPC, visits, number of leads collected…. It is in fact ROAS: Back to Ad Spend, not ROI. These media indicators (ROAS) are relevant, but they can only measure part of the benefits of digital. Marketing managers then justify the performance of their actions by looking only at a limited part of the company’s economic model: media buying.
– Okay. So in this case what are the indicators that should be taken into account? asked the President, whose interest was starting to awaken.
– The first way to calculate the Digital ROI is calculated in relation to its opportunity cost. We must therefore ask ourselves the question of the cost for your company of not investing in digital.
– And how do I calculate that?
– It’s quite simple: you just need to compare the percentage of turnover achieved online, compared to the average for your sector. You can also compare yourself to the online sales of your main competitor, if you have that information. You can thus estimate the amount of turnover you are depriving yourself of, by having little or no presence on the Internet.
– I understand the logic, but it works mostly for e-commerce sites, or companies that sell their products directly. This is not my case: I have resellers and distributors, explained the President.
The Digital Expert paused before continuing.
– In your case, the answer comes from the analysis of the purchase journey of your consumers. Out of 100 consumers in your market, how many went to consult information online before buying on the Internet or in stores? 70%? 80? These are all purchasing acts for which you have not been able to influence their purchasing behavior, to the benefit of your competitors.
– It’s true that we do more and more an Internet search before buying a new product, admitted the President, thinking back to his last personal purchases.
– Yes, the Internet research stage is often essential. But you have to know how to remain careful, and not give in to the sirens of “all digital”. Going on the Internet is not a magic bullet for building a business. In some markets, your consumers are not on the Internet. For example, they prefer to have direct advice from professionals, doctors… In this case, there is no point in over-investing because you will not be able to really influence the purchasing path. You must therefore know how to measure the real potential that this communication and sales channel can bring to you, and invest accordingly.
– And how can I get an idea of this potential for my business? the President asked curiously.
– It’s quite simple: put yourself in the shoes of a consumer and list all the questions he will ask himself to buy a product or a service that you offer. Then identify the volume of monthly related searches on Google Adwords. This will give you some indication of the number of people involved in a buying process, and therefore the real potential of the Internet for your business.
– I understand… But the Internet is not just used to generate sales! Social media like Facebook, for example, are not profitable!
– It depends… The second way to calculate the ROI is to take intangible values into account. Social media is a great way to build brand awareness and consumer brand preference. With the variety and interactivity of the formats available you can better engage consumers, and therefore increase your brand preference. This will inevitably have an impact on your sales.
– And how can I verify that?
– The best way is to carry out a comparative study between Internet users exposed to your digital media: sites, banners, videos, social media, etc., and those who are not. You will be able to compare the differences in behavior and measure the real impact of your digital activities. More simply, you can look on Google Trends to see if the awareness of your brand or your products grows during or after a campaign.
– Ah yes, it is very silly but I had not thought of it, said the President. Effectively measuring consumer satisfaction and engagement is more complicated than counting clicks.
– Yes, but that’s the stake. You have to be able to identify the value of a customer over its entire lifecycle. Digital channels like e-mail and social media make it possible to keep it engaged and therefore increase its value, its lifespan and its profitability.
– But all customers are not equal …
– That’s right ! Most often the ROI of digital is calculated according to a third method: media performance. Most frequently, campaign performance analyzes stop at declaring the number of leads collected. But these leads must also turn into quality customers! To find out, we must therefore monitor the behavior of these new buyers over time, and compare with consumers recruited through channels other than digital.
The President nodded.
– Thank you for your explanations. Behind the ROI arises the question of the strategic importance of digital in the economic model of my company. Reducing digital to its sole media logic is to underestimate its importance for the growth of my business.
Read also: How to improve your mobile ROI?