How to Measure Digital Marketing Performance

How to Measure Digital Marketing Performance

Numbers don't tell stories. But people do.

In digital marketing, numbers are just the raw materials we use to craft the stories.

When you assemble them right, they can help you paint a picture of success… or failure.

One of the main issues is that marketers are drowning in data. Everything is collected, and anything that moves is measured, but sometimes those aren’t the things that matter for ROI.

How about this: What if we zero in on the handful that drives revenue instead of tracking every available metric? What if we stopped thinking about analytics as a security blanket and started using it as a navigational tool?

Because this industry, and the people that do it well, aren’t interested in vanity metrics or impressing the CEOs with big numbers. It’s about recording and improving what moves the needle for businesses.

So, let us explore how to do that—no fluff and as little marketing jargon as possible – just a simple step-by-step guide on measuring digital marketing performance… properly.

Ready to turn data into direction?

Why Measuring Digital Marketing Performance Matters

Why is it even important to measure digital marketing performance?

Without your GPS or a map, you wouldn’t set off on a cross-country road trip. And that’s what you get when you measure your marketing performance – a guide and system to grow your brand.

Consider just a few things:

1. You can’t improve what isn’t measured: If you don’t have the data, you’re just guessing. Measurement gives you accurate information on which to base decisions.
2. Results can help you optimise resources wisely: Knowing the channels that bring the best results allows you to invest in them more.
3. You can set realistic goals: When you understand what’s performing, you can set better growth goals.
4. It will help you understand your audience: You’ll be able to find what resonates with customers and what doesn’t.
5. It can help justify marketing spend: Having objective data makes it easier to prove the value of the marketing strategy to the stakeholders.

So that’s the why. Let’s get into how to measure digital marketing performance.

The Digital Marketing Metrics That Really Matter

There are so many metrics that it would make your head spin. But not all of them are equal.

Some vanity metrics I mentioned might look impressive to an untrained eye, but they don’t tell you much.

For example, if you have 250,000+ Instagram followers, that looks amazing. But what if 95% of them are purchased or bot accounts? Are you going to get engagement or traction?

Let’s take a look at some of the ones that really matter.

1. Return on Investment (ROI)

ROI is the big one.

It tells you in the simplest terms how much profit you are making compared to what’s being spent. It’s the most straightforward measure of whether your marketing efforts bring results.

How do you calculate it?

(Revenue - Cost) / Cost x 100

For example, if you go and spend £1,000 on a marketing campaign and generate £5,000 in revenue, that’s an impressive 400% ROI!

(£5,000 – £1,000) / £1,000 x 100 = 400%

2. Customer Acquisition Cost (CAC)

How much does it cost to get a new customer on board? This metric, in particular, helps you understand the efficiency of your marketing investments.

Here’s how it’s calculated:

Total marketing spend / Number of New Customers

3. Customer Lifetime Value (CLV)

The CLV helps you understand how valuable a customer is to your business in the long term. It’s vital for subscription-based companies or those on a retainer.

Here’s how to work it out:

(Average Purchase Value x Average Purchase Frequency) x Average Customer Lifespan

4. Conversion Rate

The conversion rate is a basic one. For example, it shows the percentage of website visitors who take the next step. E.g. Purchasing something or signing up for an email newsletter.

That can be calculated like this:

(Number of Conversions / Total Number of Visitors) x 100

5. Click-Through Rate (CTR)

The CTR measures, you guessed it, how often people click on your links, be it an ad or a quote request page. It’s a pretty good indicator of how engaging your content is, but there are other aspects to consider – user intent, bounce rates, etc.

It’s a simple calculation:

(Number of Clicks / Number of Impressions) x 100

6. Bounce Rate

Your bounce rate is the percentage of visitors who leave your site (bounce away) after just viewing the page they landed on. A high bounce rate could be alarming, but it could also mean they got an answer to their question quickly.

It can be tracked in various ways, but a simple breakdown is:

Single-page Sessions / Total Sessions

7. Traffic Sources

Uncovering where your visitors are coming from (organic search, paid advertising, social media, etc.) can help you gain focus on the most effective channels.

These give you a base to measure digital marketing performance. But remember that the specific metrics that matter the most to you will depend on your business goals and the nature of the digital marketing campaigns.

Setting Up Your Measurement Framework

Now that we know what’s being measured let’s look at setting up a framework to track them. I promise it’s not as daunting as it sounds!

Define Your Goals

First, what are you trying to achieve in your marketing?

Have you heard of SMART goals?

• Specific: Clearly defined and objective
• Measurable: Quantifiable and trackable
• Achievable: Realistic, given your resources
• Relevant: Aligned with your overall business objectives
• Time-bound: With a clear deadline

For example, don’t tell me, “I want a bazillion visitors to my website!” I can’t control Google.

Instead, a SMART goal could be established: “Increase organic website traffic by 25% in the next six months”.

It’s specific (25% increase), measurable, achievable (realistically), relevant and time-bound (6 months).

Choose Your Tools

Yes, you can spend thousands a month on the best tools. But you probably don’t need to.

Here are a few essentials you can find for free online (or for very little) that give you powerful insights.

1. Google Analytics: The grandfather of web analytics tools. It's free and gives you a wealth of information about your website traffic and user behaviour.
2. Google Search Console: Another free tool from Google that helps you monitor your site's presence in Search results.
3. Social Media Analytics: Most social platforms have built-in analytics tools. Facebook Insights, X Analytics, and LinkedIn Analytics are all free and can provide valuable data.
4. Email Marketing Software: Tools like Mailerlite or Constant Contact provide analytics on your email campaigns.
5. CRM Software: Customer Relationship Management tools like HubSpot or Salesforce can help you track customer interactions and sales.

Set Up Tracking

Once you’ve selected your toolkit, you must set them all up properly. This typically means adding ‘tracking codes’ to your website and connecting the various marketing platforms. 

Most of the ones I’ve used have tutorial videos or simple instructions, but if you’re stuck, look at YouTube. They are pretty easy to work out.

Create a Dashboard

With everything set up, you will want to create some kind of ‘dashboard’ that collects all the critical metrics in one place.

This could be as simple as a Google Sheets document that you update manually or look into something like Google’s Looker Studio. It has a bit of a learning curve, but it will be more dynamic and future-proofed.

The key here is to make things as easy as possible so that performance can be checked at a glance and any growth opportunities can be spotted quickly.

Measuring Performance Across Different Channels

Digital marketing is a vast ecosystem of channels and tactics, but here’s how to measure performance on the most common ones.

Website Performance

For most of our clients, their website is the hub of all their digital marketing efforts. It’s, therefore, critical to see how it’s performing over time.

Be sure to check:

Traffic

• Overall traffic: How many people are visiting the site?
• Traffic sources: Where are they coming from?
• New vs returning visitors: Are you attracting new people, or are previous visitors returning?

Engagement

• Time on site: How long are people spending on your site?
• Pages per session: How many pages are they viewing?
• Bounce rate: Are people leaving after checking just one page?

Conversions

• Conversion rate: What percentage of visitors are taking your desired actions?
• Goal completions: How many people are completing specific goals you've set up?

Search Engine Optimisation (SEO)

SEO is all about improving your visibility in search engine results. Here's what to track:

• Organic traffic: How many visitors are coming from search engines?
• Keyword rankings: Where do you rank for your target keywords?
• Click-through rate: How often are people clicking on your search results?
• Backlinks: How many quality websites are linking to yours?

Pay-Per-Click (PPC) Advertising

If you're running paid ads on platforms like Google Ads or Bing Ads, you'll want to keep an eye on:

• Click-through rate (CTR): Are your ads compelling enough to get clicks?
• Cost per click (CPC): How much are you paying for each click?
• Conversion rate: Are the clicks turning into actual customers?
• Quality Score: How relevant and sound are your ads according to the platform?

Social Media Marketing

Social media metrics can vary depending on your goals, but some common ones include:

• Followers/fans: How is your audience growing over time?
• Engagement rate: Are people interacting with your content (likes, comments, shares)?
• Reach: How many people are seeing your content?
• Click-through rate: Are your social posts driving traffic to your website?

Email Marketing

For email campaigns, focus on:

• Open rate: Are people opening your emails?
• Click-through rate: Are they clicking on links within the email?
• Conversion rate: Are these clicks leading to desired actions?
• Unsubscribe rate: Are people opting out of your emails?

Content Marketing

Measuring content performance can be tricky, but here are some metrics to consider:

• Page views: How many people are viewing your content?
• Time on page: Are they reading it?
• Social shares: Is your content being shared on social media?
• Backlinks: Is your content attracting links from other websites?
• Conversions: Is your content leading to desired actions?

Remember, the specific metrics you focus on will depend on your goals for each channel. The key is to align your measurements with your objectives.

Advanced Measurement Techniques

Are you ready to look at some advanced techniques that can give you deeper insights?

These might take your game to the next level.

Attribution Modelling

This is all about understanding which touchpoints in the customer journey are most meaningful in driving conversions. There are a few models you can use:

1. Last Click Attribution: Gives all the credit to the last touchpoint before conversion.
2. First Click Attribution: Gives all the credit to the first touchpoint.
3. Linear Attribution: Distributes credit equally across all touchpoints.
4. Time Decay: Gives more credit to touchpoints closer to the conversion.
5. Position Based: Gives more credit to the first and last touchpoints.

Google Analytics offers these models out of the box, allowing you to compare how different models affect your understanding of channel performance.

Cohort Analysis

Cohort analysis involves tracking a specific group of users over time. This can help you understand how user behaviour changes as they become more familiar with your product or service.

For example, look at all users who signed up in January and track their engagement over the next six months. 

This can give you insights into retention rates and lifetime value.

A/B Testing

A/B testing (also known as split testing) involves creating two (or more) versions of a piece of content and seeing which performs better. This could be applied to:

• Email subject lines
• Ad copy
• Landing page designs
• Call-to-action buttons

By testing different elements, you can continuously improve your marketing performance.

Heat Mapping

Heat mapping tools like Hotjar or Crazy Egg can show where users click buttons or scroll to find what they need. This can help you understand:

• Which parts of your page are getting the most attention
• Whether essential elements are being overlooked
• How far down the page users are scrolling

This information can be invaluable for optimising your website design and content placement.

Customer Journey Mapping

Customer journey mapping creates a visual representative of every customer experience they have with your brands. This can show you:

• Key touchpoints in the customer journey
• Pain points that might be causing drop-offs
• Opportunities for improving the customer experience

By understanding the entire customer journey, you can interpret your performance metrics and identify areas for improvement.

Turning Data into Action: How to Use Your Metrics

Okay, what do we do now with all this new data?

The fundamental value in measuring digital marketing performance is using it to make better decisions.

Let’s have a look at some ways to turn metrics into insights.

Look for Trends

Don’t stay focused on day-to-day fluctuations. Instead, look for trends over time. Are your key metrics generally moving in the right direction? If not, what might be causing the decline?

Benchmark Against Industry Standards

While every business is unique, industry benchmarks can give you a sense of how you perform relative to others in your field. Look for benchmark reports in your industry, or use tools like Google's Benchmark reports in Analytics.

Identify Your Best Performing Channels

Use your data to understand which channels drive the most value for your business. This might not always be the channel with the most traffic – sometimes, a channel with lower traffic but higher conversion rates can be more valuable.

Optimise Your Campaigns

Use your metrics to refine your campaigns continuously. For example:

• If your email open rates are low, experiment with different subject lines.
• If your PPC ads have a low click-through rate, try tweaking your ad copy or targeting.
• If your landing pages have a high bounce rate, improve the content or design.

Allocate Resources Based on Performance

Use your ROI calculations to inform your budget allocation. Channels performing well deserve more investment, while underperforming channels need to be reassessed.

Set New Goals

As you achieve your current goals, use your performance data to set new, more ambitious targets. This keeps your team motivated and drives continuous improvement.

Share Insights Across Your Organisation

Don't keep your insights to yourself! Share them with other teams in your organisation. Your data might provide valuable insights for product development, customer service, or sales teams.

Test and Learn

Use your data to form hypotheses about what might improve performance, then test these ideas. This creates a cycle of continuous improvement.

Remember, the goal isn't just to collect data – it's to use that data to drive better marketing decisions and, ultimately, better business outcomes.

Common Pitfalls in Measuring Digital Marketing Performance

Even the most seasoned marketers can sometimes stumble when measuring performance. Here are some common pitfalls to watch out for:

Focusing on Vanity Metrics

Getting caught up in metrics that look good is easy, but don't tell you much about your business performance. 

Having a lot of social media followers is great, but if they're not engaging with your content or converting into customers, is it helping your bottom line?

Ignoring the Customer Journey

Digital marketing often involves multiple touchpoints before a conversion. If you only look at the last click before purchase, you might undervalue other essential parts of your marketing funnel.

Not Segmenting Your Data

Looking at aggregate data can hide valuable insights. Always try to segment your data by factors like:

• Traffic source
• Device type
• Geographic location
• Customer type (new vs returning)

Misinterpreting Correlation as Causation

Just because two metrics move together doesn't necessarily mean one is causing the other. Look for other factors that might be influencing your results.

Forgetting About Offline Conversions

If your business has online and offline components, ensure you track how your digital marketing efforts influence offline conversions.

Not Accounting for Seasonality

Many businesses experience seasonal fluctuations. Make sure you compare your performance to last year's period, not just last month.

Overlooking Quality of Traffic

It's not just about how much traffic you're getting but the quality of that traffic. A smaller amount of highly targeted traffic can be more valuable than a large amount of untargeted traffic.

Neglecting to Set Up Proper Tracking

Make sure you've set up your tracking correctly. Simple mistakes like not setting up goal tracking in Google Analytics can lead to missing crucial data.

Not Considering External Factors

Changes in your digital marketing metrics might be due to external factors like:

• Algorithm updates
• Competitor actions
• Market trends
• Economic conditions

Always consider the broader context when interpreting your data.

Focusing Too Much on Short-Term Metrics

While tracking short-term performance is essential, keep sight of long-term metrics like customer lifetime value and brand equity.

By being aware of these common pitfalls, you can avoid them and ensure that your performance measurement is as accurate and helpful as possible.

The Future of Digital Marketing Measurement

As we wrap up our deep dive into measuring digital marketing performance, let's take a moment to look ahead. 

Digital marketing is constantly evolving, and so is how we measure it. Here are some trends to keep an eye on:

AI and Machine Learning

Artificial Intelligence and Machine Learning are already significant in digital marketing, and their influence on measurement will only grow. We can expect to see:

• More sophisticated predictive analytics
• Automated insights generation
• Real-time optimisation based on AI-driven insights

Privacy-First Measurement

With increasing concerns about data privacy and regulations like GDPR, the future of measurement must balance insight with respect for user privacy. This might involve:

• More reliance on first-party data
• Advanced anonymisation techniques
• Consent-based tracking systems

Cross-Device Measurement

Measuring the customer journey becomes more complex as users interact with brands across multiple devices. Future measurement solutions must provide a unified view of user behaviour across all touchpoints.

Voice and Visual Search Analytics

With the rise of voice assistants and visual search tools, marketers will need new ways to measure these interactions. This might include metrics like:

• Voice search impressions and conversions
• Visual search accuracy and engagement rates

Integrated Marketing Measurement

As the lines between different marketing channels continue to blur, we'll see a move towards more holistic, integrated measurement frameworks. These will provide a comprehensive view of marketing performance across all channels and touchpoints.

Emotional and Sentiment Analysis

Beyond just tracking clicks and conversions, future measurement tools can gauge the emotional response to marketing efforts. This could involve analysing:

• Sentiment in social media comments
• Emotional reactions to video content
• Brand affinity and loyalty metrics

Real-Time, Actionable Insights

The future of measurement isn't just about collecting data – it's about turning that data into actionable insights in real time. We expect to see more tools tracking performance and providing instant optimisation recommendations.

As these trends shape the future of digital marketing measurement, one thing remains clear: effectively measuring and analysing marketing performance will continue to be a crucial skill for marketers. 

By staying on top of these trends and continuously refining your measurement approach, you'll be well-positioned to drive marketing success in the future.

Conclusion: Mastering the Art of Digital Marketing Measurement

We've covered a good chunk, from the basics of why measurement matters to advanced techniques and future trends. 

But there's one thing I want you to take away. 

Measuring your digital marketing performance isn't just about numbers and metrics – it's about understanding your target audiences, improving your strategies, and ultimately driving business growth.

Remember, measurement is not a one-time task but an ongoing process. 

The landscape is constantly changing, and so should your measurement strategies. 

Stay curious, keep learning, and don't be afraid to experiment with new approaches.

Here are some key takeaways to keep in mind:

1. Always tie your metrics back to your business goals. Don't measure for the sake of measuring.
2. Focus on actionable metrics that can inform your decision-making.
3. Look at your data holistically – understand how different channels and metrics interact.
4. Use your insights to optimise your strategies continuously.
5. Stay up-to-date with new measurement tools and techniques.

By embracing a data-driven approach to digital marketing, you're setting yourself up for long-term success. 

You'll be able to make more informed decisions, allocate your resources more effectively, and demonstrate the actual value of your marketing efforts.

So, are you ready to take your digital marketing measurement to the next level? Remember, every journey begins with a single step. 

Start by reviewing your current measurement practices, identify areas for improvement, and begin implementing some of the strategies we've discussed.

The world of digital marketing is full of opportunities, and with the right measurement approach, you'll be well-equipped to seize them. 

Here's to your marketing success!

Frequently Asked Questions

To wrap up this comprehensive guide, let's address some common questions about measuring digital marketing performance: