Paid Media Consulting: How to Measure ROI

One question that we as a digital marketing agency hear a lot is “how do I measure the ROI of X marketing tactic?” And while we could write a novel of all the various ways to measure different digital marketing tactics and how they are impacting your business, let’s delve deeper into one facet that’s pretty familiar to most - paid media.

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Paid media in its many formats, whether it’s search, social, display, etc., is a crucial part of your online marketing strategy. Whether you are a single location business, have locations across the country, are B2B or B2C, you can benefit from this tactic. A paid media strategy ensures that your brand and your content is seen by your target audience and the good news is, paid media is more scalable than a lot of other digital marketing tactics. To put it simply, there are three main parts to successfully using paid media as a digital marketing tactic: 1. Create engaging content, 2.  Get the right people to engage with them at a cost-effective rate, 3. Effectively measure the reach and impact of those ads.

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Measuring your performance is critical because it allows you to prove the value of your work, as well as improve your performance moving forward. Whether your business is creating, running, and measuring your paid media campaigns in-house, or outsourcing the work to a digital marketing agency, here are some key terms and KPIs that you need to know to truly understand the value and return on your investment in order to help drive business objectives:

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Impressions / Total Reach

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This metric refers to the total number of people who saw your ad or piece of content. Remember that every platform and campaign is different when it comes to measuring reach and impressions, but overall it remains at the top of your customer funnel and represents the total broad reach to your audience.

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Social Engagement / Shares

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Engagement metrics are the next step down in the paid media KPI funnel and are just as important to ensure that the content you are promoting is resonating with your target audience. This encompasses social media ‘likes’, comments, shares, retweets, and more. These metrics are used primarily on social media networks but can also be applied to blog content. No matter the platform, these metrics are used to enhance brand awareness and are good indicators to see how effective or ineffective your content is when it comes to customer interests. To ensure your ads are performing at their desired level, you can take a look at your quality/relevance score.

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Cost & Click Performance

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The following metrics are used to define and measure the pricing model of a paid media campaign as well as click-thru performance.

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• CPM (Cost per thousand): An impression-based payment model in which a budget amount is allocated per thousand impressions of an ad unit.  Average CPM: $3.50, but can range anywhere from $1.00-$60.00 depending on industry and publications.
 

• CPV (Cost per view): A video view based payment model that charges the advertiser per 10 or 30 second video view.   Average CPV: $0.20, usually ranging anywhere from $0.10-$0.30.
 

• CPC (Cost per click): This is the cost that is charged when someone clicks on your ad that brings users to your website or a landing page.   Average CPC: $2.00, but can range anywhere from $0.50-$25.00 depending on industry, competition, and placements.
 

• CTR (Click thru rate): This is the percentage of how many people click on your ad versus the total number of impressions.   Average CTR: 2.00%, but can range anywhere from 0.10%-15.00% based on industry, ad tactic, and placements.

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• CPA (Cost per acquisition): This is one of the most important ROI metrics of paid media campaigns. CPA measures conversions as a result of your ad campaign in the form of online leads or sales made.
 Average CPAs range across the board based on a number of factors. We can help you discover the ideal CPA for your business.  

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When creating and establishing your paid media efforts, it’s important to set goals or benchmarks for these metrics in order to be able to assess performance and results.

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Website Traffic

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Depending on your campaign goals, measuring total website traffic is an important component in calculating the ROI of your paid media efforts. Website traffic is crucial to paid media ROI because total clicks to your website or content is optimized within a CPC campaign and measured in the form of CTR. However, website visits alone aren’t good enough to gauge ROI. It’s what those visitors do on your website that really contributes to your ROI and are measured in the form of on-site conversions.

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On-Site Conversions

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A conversion is defined as the action that you want users to take on your website. Conversions can include anything from a user filling out a form, registering for a program/service, downloading an eBook, subscribing to your newsletter, filling out a survey, contacting your business through a form on your site, making a purchase, etc. The implementation of conversion tracking on your website and landing pages will help measure the ROI from your various paid media efforts. A critical thing to remember here is that each paid media campaign should have a clear, conversion-driven call-to-action to encourage the user to complete a conversion.

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Return on Investment

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Measuring the ROI of your paid media efforts is crucial in knowing whether the money you’re putting into these campaigns is turning into sales or might as well be thrown out the window. Once you have established conversion data, you can then begin assigning value to these leads based on the percentage that turn into paying customers. Further value can be determined in terms of lifetime value for repeat business from these customers or if they refer other customers to your brand. Once you have the CPA of your paid media efforts, you can then prioritize and optimize the tactics which perform the best for your business and make the largest contribution to your goals.

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To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment, and the result is expressed as a percentage or a ratio. See formula below:

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We understand this stuff isn’t easy. There is so much data and calculation that goes into measuring the ROI of your marketing efforts, and paid media is just one of many digital marketing tactics to evaluate results from. Good thing you don’t have to do this alone! If you would like to know more about how to measure paid media ROI or want to get started on paid media campaigns, please contact us! Click on the button below to test out our interactive ROI calculator and if you would like to learn some more marketing ROI formulas that will impress your boss, download our eBook!