“I know half of my advertising budget is wasted,” John Wanamaker famously said; “I just don’t know which half.” Measuring and optimizing the content marketing ROI (and more generally the ROI of all marketing initiatives) is the holy grail of marketing. Even today it’s not always easy or even possible. Nevertheless, calculating (or at least estimating) and optimizing the ROI of digital marketing initiatives like content marketing is now possible and feasible for most businesses.
All you need is a well-designed website or blog, a little knowledge of the advanced features of Google Analytics, and a few basic business metrics. This is not an exhaustive how-to guide, but it will show you the basics.
Here’s one possible formula for calculating content marketing ROI:
Content marketing ROI = (number of prospects who view your content) x (prospects-to-leads conversion rate)
x (lead-to-customer conversion rate) x (lifetime value per customer) – (cost of content creation and promotion)
In addition to ROI, you can also calculate other important metrics like cost-per-lead using the same raw data. Let’s briefly go over the metrics in this formula and how to measure them.
A conversion rate is the percentage of people who do what you want them to do after consuming your content. The most important two conversion rates are your prospects-to-leads conversion rate and your leads-to-customers conversion rate. Most businesses can measure both with a well-designed website and the advanced features of Google Analytics.
You can measure your prospects-to-leads conversion rate for prospects who fill out any kind of contact or subscription form.
You can directly measure your lead-to-customer conversion rate using Google Analytics under two circumstances: first, if your customers pay for your products or services online (eCommerce); or, second, if your customers place orders for your products or services online and pay with cash-on-delivery.
If all or most of your sales are generated offline (e.g. in a retail store or in-person meetings), then you may be able to find a creative way to measure this conversion rate indirectly. For instance, if you’re a B2B company whose sales are high margin and low volume, you could use a manual database or CRM system. If you’re a B2C retail store
whose sales are relatively low margin and high volume, you could track the sales-volume associated with coupons and discount codes distributed online only.
If all else fails, you can make an informed guess. Guesses are the most vulnerable to error, of course, but they’re still useful as long as they’re somewhat based in reality.
Cost of content promotion and creation & lifetime value per customer
Measuring your cost of content creation and promotion is pretty self-explanatory.
Finally, you need to know your approximate lifetime value per customer (CLTV). There are many methods to calculate CLTV of varying accuracy and complexity, which is beyond the scope of this article. If you don’t know how to calculate your CLTV, I recommend learning about it online, as it’s an extremely important decision-making tool for any business.
When you first start measuring the cost-effectiveness and ROI of any marketing initiative (content marketing or otherwise), it will inevitably be suboptimal. It may even be costing more than the revenue it generates. That’s normal at first, so don’t give up yet.
Instead, use a lean methodology to optimize it. Make small changes that are easy to implement and easy to reverse in small batches. Use analytics and automated A/B testing to see which changes increase conversion rates. Based on the validated learning you gain from this process, you can make data-driven decisions about which changes to discard and which to keep.