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Measuring Marketing ROI: Key Metrics to Track

To many business owners, marketing, particularly digital marketing, social media, and so on, can be somewhat confusing. The truth is that even for someone like me, who lives and breathes digital marketing and the latest trends, it can be hard to keep up. However, there are some common things that any business owner should know about marketing, or rather, how to know if the marketing that’s being done is working or not. In today’s article, I will discuss – in simple terms – seven metrics that a business can use when measuring marketing ROI: key metrics to track.

Table of contents

The Single Most Important Metric When Measuring Marketing ROI

How to Calculate Marketing ROI

Measuring Marketing ROI: Key Metrics to Track

Short-Term vs. Long-Term Marketing ROI

The Single Most Important Metric When Measuring Marketing ROI

So, first things first.

Marketing should always, always, always lead to an increase in sales.

I know. It’s so basic that I didn’t need to say it, but I did! I said it because, believe it or not, many businesses I speak to overlook this point.

Case in point:

Many small businesses know “they need to be on social media.” Lacking time for it, they hire a family member or a marketing company to post on and manage their social media. Well, it’s true. Social media is a fantastic way to reach your audience and potential customers while retaining existing ones. However… which platform? What actions should you be taking? And is it producing sales? Unfortunately, most small businesses I’ve spoken to about social media cannot trace their social media to increased sales. That’s not to say social media can’t be used to generate leads and sales – it absolutely can. But I’m just making the point that as evident as it is, I still find many small businesses that don’t use sales as the key metric to track when it comes to measuring marketing ROI. So, while it’s essential and probably didn’t have to be said, I said it, and it’s worth repeating: marketing should always result in increased sales.
Alright, not that the obvious one is out of the way; sales aren’t the only metric to consider. For example, not too long ago, I was consulting a solar installation company that was paying for leads, but sales were not increasing. Immediately, one would think, “bad leads.” A bit of a deeper look found that a) leads calling in often went to voicemail because there was no dedicated person to answer incoming calls, and b) leads passed onto sales reps were not being put into the CRM and so never being followed up on. So, while sales are the most important result, they are not the only metrics you should use when measuring marketing ROI. Some of the most valuable insights come from tracking additional key marketing metrics that reveal the complete picture of your marketing’s effectiveness. For example, customer lifetime value (CLV). The lifetime value of a customer can turn a seemingly low return into a profitable one. Imagine spending $50 to acquire a lead who only purchases a $12 item. At first glance, this might seem like a loss. However, what if that same customer goes on to spend over $100 within the year? The return on your marketing dollars starts to make more cents (sense—pun intended). In this article, I will discuss seven essential metrics for measuring marketing ROI for businesses of all sizes, shapes, and colors.

How to Calculate Marketing ROI

Marketing ROI (return on investment) measures the revenue your marketing generates compared to the money you spend on it. Let’s say you spend $1,000 on a marketing campaign and generate $3,000 in sales. Your ROI would be 200%.

Here’s how to calculate ROI:

1. Subtract the investment from the return: 3,000 – 1,000 = 2,000 2. Divide the result by the investment: 2,000 ÷ 1,000 = 2 3. Multiply by 100 to get a percentage: 2 × 100 = 200% Your ROI is 200%.

This means you earned $2 in profit for every $1 spent, a clear indicator of a highly successful campaign.

Measuring Marketing ROI: Key Metrics to Track

#01

Cost Per Lead (CPL)

Cost per lead (CPL) tells you how much it costs to generate a potential customer who has shown interest in your business. For example, if you spend $100 and gain ten leads, your CPL is $10. This metric is important because it helps you evaluate the efficiency of your marketing efforts. A lower CPL means you’re getting more leads for less money, which is a sign that your campaigns are working well.

Use this formula to calculate your cost per lead:

Let’s say you spend $500 on ads and gain 50 leads.

1. Divide the total ad spend by the number of leads:

500 ÷ 50 = 10

Your cost per lead is $10.

This means you’re spending $10 to acquire each lead.

Keeping CPL low while maintaining lead quality is a good sign of an efficient campaign. A low CPL indicates that your campaigns are efficiently generating leads.

#02

Customer Lifetime Value (CLV)

Customer lifetime value (CLV) is the total amount of money a customer will spend with your business over their lifetime. This metric shows how much a customer is worth to your business in the long run. It’s crucial because it helps you justify spending more to acquire high-value customers. For example, a customer who spends $100 a year for 10 years is worth $1,000, even if it costs $200 to acquire them.

Here’s how to calculate CLV:

Imagine a customer spends $200 per year with your business and remains a customer for 5 years. If your customer acquisition cost is $300.

1. Multiply annual revenue by the number of years:

200 × 5 = 1,000

2. Subtract the customer acquisition cost:

1,000 – 300 = 700

Your CLV is $700.

This means that each customer contributes $700 in profit over their lifetime after covering acquisition costs. Tracking CLV helps you understand the long-term value of your marketing efforts and justify higher acquisition costs.
#03

Average Sale Price

The average sale price is the average revenue you earn from each sale. It’s calculated by dividing your total revenue by the number of sales. This metric is important because it gives insight into how much customers typically spend per transaction. Knowing your average sale price helps you set realistic revenue goals and better understand the impact of discounts or promotions. This metric shows the average revenue generated from each sale, allowing you to account for discounts and product variations.

If you generate $10,000 in total sales from 100 purchases, here’s how to find your average sale price:

1. Divide total revenue by the number of sales:

10,000 ÷ 100 = 100

Your average sale price is $100. This metric helps you understand the typical value of each transaction.

Knowing your average sale price helps you set realistic expectations for ROI.

#04

Lead Close Rate

Lead close rate is the percentage of leads that turn into paying customers. If you generate 100 leads and 25 of them make a purchase, your lead close rate is 25%. This metric is vital because it shows how effective your sales process is. A higher close rate means you’re doing a great job of converting interest into action, while a low rate might indicate room for improvement in your follow-up or targeting.

You generate 200 leads, and 50 of them become customers.

1. Divide the number of closed leads by the total number of leads:

50 ÷ 200 = 0.25

2. Multiply by 100 to get a percentage:

0.25 × 100 = 25%

Your lead close rate is 25%.

This means that one out of four leads converts into a paying customer, a key metric for evaluating the effectiveness of your sales process. Pair your lead close rate with CPL to determine how effectively you’re converting leads into sales.
#05

Cost Per Acquisition (CPA)

Cost per acquisition (CPA) measures your spending on acquiring a new customer. For example, if you spend $500 on marketing and gain five customers, your CPA will be $100. This metric is critical because it shows how cost-efficient your marketing efforts are. Ideally, your CPA should be lower than your customer’s lifetime value to ensure profitability.

If you spend $2,000 on marketing and gain 20 customers, here’s how to calculate CPA:

1. Divide the marketing costs by the number of customers acquired:

2,000 ÷ 20 = 100

Your cost per acquisition is $100.

This shows how much you spend to acquire each customer, a critical efficiency measure. If your CPA is lower than your average revenue per sale, you’re likely on the right track.
#06

Cost Per Click (CPC)

This is an important metric when running any form of digital advertising through Google or social media. You usually only pay Google or Facebook when someone clicks on your ad, hence the “cost per click.” The more people click on your ad, the more people land on your website or landing page; the more people do that, the more people buy.

CPC measures the cost of each click on your pay-per-click (PPC) ads:

You spend $500 on a pay-per-click ad campaign and receive 250 clicks. While this is something your advertising team will usually calculate and report, this is how to calculate it:

1. Divide the total ad spend by the number of clicks:

500 ÷ 250 = 2

Your cost per click is $2. This means each click costs you $2, helping you gauge the efficiency of your PPC campaign.

Low CPC with high conversion rates can signal an effective PPC campaign.
#07

Conversion Rate

If the cost per click measures the number of people who clicked on your ad and landed on your website or landing page, the conversion rate is the number who took the action you wanted them to take. In other words, your conversion rate shows the percentage of visitors who take a desired action, such as making a purchase or signing up for your newsletter.

If you receive 1,000 clicks on your ad, and 50 people make a purchase.

1. Divide the number of conversions by the number of clicks:

50 ÷ 1,000 = 0.05

2. Multiply by 100 to get a percentage:

0.05 × 100 = 5%

Your conversion rate is 5%. This means that 5% of visitors to your site take the desired action, whether it’s making a purchase, signing up, or completing another goal.

A high conversion rate often indicates strong landing pages and relevant ad targeting.

Short-Term vs. Long-Term Marketing ROI

While tracking immediate sales and ROI can give you quick insights into campaign performance, long-term ROI offers a more accurate picture of your marketing’s true impact.

So, when measuring long-term ROI, consider the entire buyer journey, from initial ad clicks to repeat purchases, to understand your efforts’ value fully.

Marketing is about more than immediate sales—it’s about building relationships, nurturing leads, and creating loyal customers.

By tracking these key metrics, you can fine-tune your strategies, allocate resources effectively, and ensure your marketing dollars work harder for you.

Remember: Marketing that doesn’t lead to measurable results isn’t doing its job.

If you’re unsure how to measure your ROI or need help optimizing your campaigns, feel free to contact me—I am here to help.

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