roi lead generation

Understanding the ROI for Lead Generation Campaigns

Are your lead generation campaigns producing the kind of returns you expect? As a small business owner, understanding the ROI of your lead generation campaigns might seem a little bit intimidating.

Nevertheless, you need to know how to evaluate and keep track of it to be able to measure the profitability of your campaigns. To make this convenient, we decided to help you figure out how you can evaluate your lead generation’s ROI, so let’s dive into it.

How to measure the ROI of Lead Generation Campaigns?

On average, small businesses spend between 7 and 12% of their revenues on digital marketing campaigns, which includes SEO, PPC, social media campaigns, and more. However, you may have to readjust your ad spend from time to time.

Now, there are two ways to measure the ROI of lead generation campaigns. The first one gives you a high-level overview and the other is a more detailed way of measuring the ROI of your lead generation campaigns.

Getting a high-level overview of your ROI from lead generation

In this method, all you need to do is deduct the total cost of all your lead generation campaigns from total revenue and split that difference proportionately.

Let’s assume, you invest $5000 in digital marketing each month, out of which 60% goes towards SEO, 20% towards PPC and the remainder 20% towards social media.

So, by the end of the month if you generate $12,000, then after deducting your ad spend, the total ROI would be 58%. You then need to split this proportionately among PPC, SEO and Social Media in this case to get a high-level overview of your overall lead generation ROI.

Digging deeper into the ROI to get micro-level insights

When you are in the initial five years of your business and are setting it up, you may have to monitor your ad spend much more closely. In that phase, you need micro-level insights so that you can readjust the spending on strategies that are working for your business.

That’s when you need to calculate the ROI for each digital marketing effort and here’s how you can do that.

Understanding the ROI of SEO efforts

The easiest way to calculate ROI on SEO is by deducting the cost of SEO from organic revenue and dividing it by the cost of SEO.

Now, your SEO costs vary depending on whether you hire full-time employees to do the needful or pay a retainer to a digital marketing agency. If you choose the latter, you must always hire an agency that makes use of advanced analytics tools and sends periodical reports of your ROI.

On the other hand, if you are doing it on your own then you will have to make use of complex tools like Google Analytics. You’ll have to start by pulling out a year’s data such as the total number of sessions and add up the growth rate.

You can calculate the growth rate by looking into the YoY growth projection in the Google Analytics dashboard. Analyzing these two factors against the total SEO spending can help you determine how much your website is benefitting from your SEO efforts.

Determining Lead Generation ROI of PPC Campaigns

When calculating ROI from lead generation through PPC campaigns, one needs to deduct the total cost of PPC campaigns (TC) from the total revenues (TR) generated from those campaigns. You then convert that into percentage and that’s the ROI.

ROI of PPC = TC – TR /100

By following this simple and straightforward formula, one may derive at a ballpark figure. However, to get more accurate campaign-wise ROI, one needs to hire the services of a seasoned professional who is skilled in data analytics.

Calculating the ROI of Social Media Lead Generation

Large businesses need to make use of complex formulae to find out the ROI from their campaigns but smaller ones can simply add up their social media marketing (paid posts and PPC) costs to PPC campaigns.

Another way of doing this is by dividing total revenues generated from social media campaigns (TRSM) by total investment in the social media lead generation efforts (TISM), and then converting it into a percentage. So, if you spent $2000 and generated leads worth $5000, then your ROI from social media campaigns would be 60%.

ROI of SM = TRSM-TISM/100

Apart from the above mentioned, you must take into account your previous average spending per customer and compare it to the current costs. This should help you determine your cost per acquisition, and the lower this gets, the better it is for your business.

As you may have figured out, calculating ROI on lead generation can be a bit difficult for you to do, and despite your best efforts, the results could be vague and erroneous. However, when you partner-up with Asset Digital Communications, we make this much easier and accurate with our comprehensive reports and periodical briefings. For further details, please feel free to schedule a consultation.