How to Measure the ROI of Digital Advertising

By Stamp

How to Measure the ROI of Digital Advertising

DMOs should be measuring the return on the investment to show stakeholders that their digital marketing strategy is working. Are you looking at the right metrics to determine the ROI of your digital strategy?

When you review your investment in digital advertising, you should notice that more and more of your DMO budget is being allocated for interactive media each year. eMarketer forecasts that with a 20.5% increase, 2016 will be the first year that US digital ad spending will overtake TV as the largest advertising category. This is primarily because a good marketing campaign will follow consumer habits, and people are spending more and more time in front of a computer or mobile screen. The second reason this trend is happening is because of the ability to measure the efficiency of digital advertising when compared to traditional advertising. Whether your digital investment has increased or not, you (or your team) should measure the return on the investment (ROI) to demonstrate to stakeholders the viability of the marketing strategy and shift toward digital. So, how do you measure the ROI? First, your DMO has to define an end goal or the definition of success for the campaign. If the ultimate goal is to grow your region’s bed tax revenue, then one could argue that the success metric is an increased room reservation conversion. However, most DMOs do not promote one hotel or accommodation in their digital ads, so tracking a booking from the ad can’t be done. Technically speaking, not every digital campaign can produce immediate bookings as they are not always leading to a reservation page. Usually, that is the responsibility of the accommodation itself. Instead, DMOs are advertising various aspects of the city or town and having the click-through go to the destination’s website for travel inspiration, planning calendars, or requesting a visitors guide. When you can watch the consumer's activity from clicking on an ad all the way to booking a hotel room, you have one metric to be included in the ROI summary. But let’s add traffic to the tourism site and visitor guide requests to the ROI goal for the digital campaign. Both of those actions show some level of intent to travel and will bring consumers that much closer to an actual visit. The measurement metric has to then shift to an awareness model. When talking about an awareness model, impressions and click-through rates (CTRs) become the bar by which to gauge performance. Emphasis is most often placed on clicks.

Common Digital Vocabulary Words:

  • ROI (Return on Investment) - One way to quantify what you are getting out of the campaign.
  • CTR (Click Through Rate) - How often are the people who see your ad clicking on it. The higher the number the better.
  • Impressions - The number of times your ad shows up on a website, phone, or digital screen.
  • CPM (Cost Per Thousand) - The cost you pay for every 1,000 times your ad shows up.
  • PPC (Pay Per Click) - Another way to purchase ads online where you only pay when someone clicks.
  • CTA (Call to Action) - Your goal for an interaction from a user. This could be a Call Now, Book Reservation, Request Information, etc.

Smart marketers aim to achieve a high click-through rate. To calculate the CTR take the number of clicks that your ad receives divided by the number of times your ad is shown expressed as a percentage (clicks ÷ impressions = CTR). The platform your ad is on determines the benchmark, but the industry you’re advertising for also determines the benchmark. For example, a .82% CTR on Facebook through an ad network is considered a success, while a 1.5% CTR is the benchmark on a traditional Facebook campaign. Another example of a strong CTR is 2% on Google PPC. While all these numbers may not really make much sense to you, the key is to aim for as high of a CTR as possible, and then to compare it to the industry standard like the ones mentioned previously. CTR is an important metric; however, the total number of clicks is what is most important. For example, if a campaign had 1,000 impressions delivered with a 10% CTR, it would have delivered 100 clicks. But, if a campaign with the same budget had a 5% CTR on 10,000 impressions, it would have delivered 500 clicks. Your budget and targeting will influence the number of impressions you buy. With every click to your website, you will have more eyeballs reading your content which will then generate more visitors. Once the CTR benchmark is determined, the platform, budget expenditure and call to action (CTA) on the landing page are all evaluated in the total equation to determine your return on investment. A CVB cannot determine ROI necessarily from one single measurement metric. The total investment in media spend has to be analyzed against the number of hotel room nights booked that you’ve tracked, the number of clicks per campaign, the traffic to your website, and the number of visitor guide sign-ups coming from those digital leads. Looking at all of these metrics combined will determine how to improve or what changes to make for more effective ROI. If reading this felt more like a class in a foreign language, then we might be able to help you and your organization. We have been planning, buying, optimizing, and reporting on digital media for years and have a great team (led by Cristen) that focuses on interactive media. And when you’re ready to talk, reach out to us and we’ll help you make your mark.