Today more than ever, the need to significantly increase your ROI (Return on Investment) in your online marketing campaigns is imperative to the overall success of your company. In order to avoid loosing valuable market share to your competition and to continually increase your brand recognition or brand awareness, boosting your ROI can have short as well as long-term beneficial effects on your overall sales, market segmentation and penetration.
To reach such goals, careful planning is everything and can save you a lot of time, frustration and, most of all, a lot of money.
The definition of ROI in online marketing campaigns
ROI is defined as the profit made from the advertising money your company spent on a particular ad campaign. At the most basic level, if somebody spends $ 3,000 on search engine advertising and if that money generates $ 12,000 in new sales and acquires new clients, this could be viewed as a positive marketing campaign and could be identified as a success.
In ROI, the ultimate goal is to increase the total volume of sales, while spending the least to acquire each and every new customer. "Fine-tuning" and adjusting all online marketing campaigns through the various search engines and reallocating your ad dollars to maximize your ROI should be your top priority in search engine marketing.
How to boost your ROI in any online marketing campaign
In order to calculate a campaign's ROI with a reasonable amount of accuracy, you will need to have access to these five important data sets:
1. The number of clicks from visitors that used your paid listings. That number is usually provided by the search engine used in your ad campaign.
2. The amount of money you spend during a given timeframe. Many search engine marketers run daily, weekly or sometimes monthly campaigns and output ROI reports for those periods. Again, this data is provided by the search engine used during that advertising campaign.
3. The number of completed orders (or sales) from the paid listings for the specific product or service you are offering. These numbers are generated by the eCommerce functionality of your site or the eCommerce solution you are using, if provided by a third party.
4. The retail price of a product. That data should immediately be available to you, since you are the administrator of that campaign.
5. The total dollar amount in sales generated by all your orders for that product, which came directly from those paid listings. That data is available from your eCommerce solution or eCommerce third party solution.
What to do with all that data
To calculate your total ROI from that campaign is relatively easy. The simple math formulas below will guide you step by step:
• The ad revenue is the amount your campaign earned, after all your advertising costs have been determined.
The formula is Revenue minus Ad Cost
• Your CPA (Cost per Acquisition) is the amount of money you actually spent to get each sale in your campaign:
The formula is Ad Cost divided by the Number of Sales
• Your final ROI is the actual profitability of your ad campaign, based on a percentage:
The formula is Ad Profit divided by Ad Cost multiplied by 100
Important notes
One word of advice: in an ideal online advertising campaign, it is strongly recommended to include all ad listings (in your titles and descriptions) and your landing pages if you happen to analyze more than one product (or more than one keyword). Failing to do that could generate reports that could be useless to you, since there won't be any accurate way of tracking which ad sold which product.
You can set up as many reports as the number of search engines you are using, since they should all be computed separately for maximum accuracy. If you prefer, you could also organize your reports by product only, or by specific keyword.
A little imagination or flexibility can go a long way in truly maximizing the overall value of all your reports.
Conclusion
Significantly boosting the overall ROI of any online marketing campaign is easy if you follow the steps given in this article. Implementing such steps will have a drastic difference in the overall return on investment of your ad campaigns.
Since search engine marketing represents such an important part of online marketing today, carefully analyzing and implementing the ROI reporting model above should significantly increase your market share and profitability of your online marketing efforts.
Additionally, and for maximum results, search engine marketers are encouraged to read more on Bid Management Tools and how they can help you optimize the ROI on all your online ad campaigns.