The Internet is a powerful advertising tool, but many companies shy away fromninvesting in it because they don’t feel they can measure return on investment.nThis is not true. The success of an online marketing campaign is easily measured,neven formulaic, if you just follow four easy steps.

QUESTION 1: nWHAT IS THE GOAL OF YOUR SITE, AND WHAT PAGES MARK THAT GOAL? nnYour web site has some value-generating goal — something that helps grow yournorganization. These goals are usually in line with larger organizational goals, andnmay include:n– Generate leads.n– Generate interest in a product or servicen– Get donationsn– Inform/persuade the publicn– Get votesnThere is a specific page on your web site that indicates you’ve achieved that goal;nwhen a visitor views that page, your site has generated value.nHere are a few examples:n– A visitor views the ‘thank you’ page at the end of an online storencheckout process.n– A visitor views the ‘thank you’ page after someone completes anninformation request form.n– A visitor views the ‘thank you’ page after someone subscribes to yourne-mail list.n– A visitor views a specific page of your site.n– A visitor watches a specific video on your web site.nGoals run the gamut from making money to less tangible stuff. You MUST determinenthat goal and the page that marks it.nQUESTION 2: nWHAT’S THAT GOAL WORTH? nNow the hard part — what’s it worth to your organization each time you achieve that goal?nIf you’re selling products online, it’s easy: Find out your profit per sale, on a sale-by-salenbasis. If you have a sales force, it’s still pretty easy: Figure out how many Internet leadsnconvert to customers, and the average value of those customers. Then multiply the two:nFor example, if 25% of all Internet leads convert, and on average, each conversion isnworth $1,000, the value of a lead is: 0.25 X $1,000 = $250nIf your only online goal is to get people to see a specific page — say, an article aboutnInternet ROI — it’s a little more difficult, but not impossible. If, for example, 1% ofneveryone who reads your article online becomes a client, and on average each clientnpays $1,000 per year, then the value is: .01 X $1,000 = $10/person reading article.nIf you’ve got a newsletter, the same measurement applies: Track how often newsletternsubscribers become customers:n10% of all subscribers become customers, and average customer is worth $1,000nValue of one signup is: 0.1 X $1,000 = $100nEven organizations that don’t sell stuff can measure effectiveness. Consider politicalnorganizations, where most of their work focuses on getting the word out, persuading thenpublic, etc. For them, you can create a points system:n1 person reading a specific article = 5 pointsn1 person viewing a specific video = 5 pointsn1 person signing up for a newsletter = 10 pointsn1 person joining the organization = 100 pointsnThis is pretty arbitrary, but it works as a comparative measure:nCampaign one got 30 people to watch a video:n30 X 5 = 150 pointsnCampaign two got 500 people to watch that video:n500 X 5 = 2500 pointsnWe may not know, literally, the value of each campaign. But we know their relative effectiveness.nThe point here is you should always consider what your web site’s goal is worth. Accuracy isnimportant, but consistency is crucial — as long as you can measure relative effectiveness, youncan evaluate advertising effectiveness. Regardless of your goals, make sure you understand theirnrelative value.nQUESTION 3: nHOW MANY TIMES DID YOU ACHIEVE THAT GOAL, AND WHY? nnYou know what your conversion goal is, from question 1. Now you need to know how oftennyou achieve that goal. To do that, you need at least three out of the four basic metrics:n1. Landings on a specific page or file. You can measure the number of times a specific pagenor file is viewed using any basic web site traffic analysis software.n2. Where your site visitors come from. Again, any basic web site traffic analysis software cannprovide this.n3. Conversions. Some ad networks, like Google Adwords, provide built-in conversion tracking,nso you can tell which ads generate value and which don’t.n4. Source of each conversion. Again, use software such as Urchin™ to measure conversionsngenerated by every advertising asset: Ads, search engine keywords, e-mail newsletters, and so on.nIf you’re selling products online the conversion metrics look like this: Shopping cart ‘order confirmed’npage was viewed 400 times, so we had 400 orders. 30 of those orders came from Google AdwordsnAd #3. Those 30 orders totaled $4,000, with a profit of $3,000. So Adwords Ad #3 generatedn$4,000 in income, with a net value of $3,000.nOr, if you’re looking at leads: The information request ‘thank you’ page was viewed 400 times,nso we got 400 leads. 30 of those leads came from Google Adwords Ad #3. Those 30 leadsnhave an average value of $250 each. So Adwords Ad #3 generated $7,500 in value.nIf you’re working with a marketing consultant who knows this is a priority, and you don’t at leastnhave three out of four metrics available, fire them and find someone else. No exceptions — howncan a consultant help you deliver effective marketing if they don’t even know whether it’s effective?nMeasure any three out of the four metrics, and you can determine return on investment.nQUESTION 4: nWHAT DID IT COST TO ACHIEVE YOUR GOAL? nnNow you bring it all together. What did you spend to achieve your goal? If you’re collecting allnthree conversion metrics, you’re set:nLook at the value of each individual conversion in light of the cost of the advertising asset thatngenerated that conversion:nSale 1 generated $1,000. It came from Adwords Ad #3. I spent $50 on clicks from that adnbefore I got this sale. So I spent $50 to get $1,000 in business.nThen average it out: Sales from Adwords Ad #3 were worth $12,000. I spent $1,000 on that ad.nAssuming I’m running a profitable distribution channel, I did pretty well.nIf you only know landings, referrers and conversions, you can still figure out general performance:nThis month I received 400 visits from Adwords Ad #3. Those visits cost me $50; I didn’t get thosenlast month. This month I generated an additional $2,000 in sales. Those additional sales came fromnthe products promoted in Adwords Ad #3. I didn’t do anything else. Chances are, Adwords Ad #3ngenerated most of those sales.nThis isn’t perfect, but you can at least determine which Internet advertising assets are not providingnvalue: This month I received 400 visits from Adwords Ad #3. Those visits cost me $50. I didn’tngenerate any additional sales this month. Adwords Ad #3 isn’t working.nIt’s better to know for sure, on a conversion-by-conversion basis, what’s generating value. But evennif you don’t know that much, you can at least do a gut check and know which ads are ineffective.nArmed with that knowledge, you can make changes and see whether those changes improve results.nONE LAST QUESTION: WHY SHOULD I DO THIS? nThere are many, many payoffs for basic ROI measurement.nFirst and foremost: You can measure which ads and campaigns generate value, and which don’t.nThe other benefits are almost as important, though. By gathering this kind of data over time, you cannmeasure more than the effectiveness of individual assets — you can measure the effectiveness ofnwhole marketing campaigns, and of different messages.nThat kind of business intelligence is invaluable, and means that measured Internet advertising deliversnvalue far beyond individual sales.nAnswer the four questions and you’ll help your organization in the short term, with more effectivenInternet marketing.

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