Which of Your Marketing Channels Is Most Profitable?

If you’re like most marketers, you use many marketing channels simultaneously to attract new customers. For example, you might be running an SEO campaign alongside a content marketing and social media strategy, all while paying for ads and affiliate links to get paid traffic from other areas of the web.

The best strategy is to disproportionately favor the strategies that are working best, funneling a bigger percentage of your budget to them, while gradually weeding out the strategies that aren’t profitable. But how can you tell which of your channels are most effective?

Step 1: Get the Right Dashboard

First, you need to get the right marketing dashboard, so you can easily track metrics from all your running campaigns in one central location. Your dashboard should be comprehensive, gathering data from all locations and presenting it to you in a way that’s easy to read. You should have enough control to manipulate variables like date ranges, and access to visuals that make your data easier to understand. Accuracy and accessibility are musts if you want to use your data accurately.

Step 2: Gather Your KPIs

Next, you’ll need to determine the key performance indicators (KPIs) for each of your main marketing channels. For example, in an SEO campaign, you’ll want to look at metrics like your search engine rankings and the organic traffic you’re receiving (the number of visitors who found your site through search engines). In most online marketing campaigns, you’ll need to look at the inbound traffic you receive from each respective channel.

Step 3: Tie Your KPIs to Revenue

Next, you’ll need to find a way to tie those KPIs to revenue. If we take our SEO example, and assume we know how much organic traffic we’re receiving, we’ll then need to determine how much revenue that organic traffic is generating. Typically, this starts with an evaluation of the value of an onsite conversion; in other words, what’s the average value of a visitor making a purchase on your site, or filling out a form? This can be tricky to calculate; you’ll often need to consider the average lifetime value of a customer, then reduce it to an average metric based on how many conversions end up successfully becoming customers.

Once you have the average conversion value, determine what percentage of incoming visitors from a given channel are converting, and you’ll be able to calculate how much revenue a channel is bringing you.

Step 4: Evaluate Costs

Next, you’ll need to calculate the costs of each channel. If you’re working with an agency that handles all of your marketing responsibilities, it may be difficult to break things down by channel. Otherwise, take a look at what you’re paying for any agencies or independent contractors, as well as the hourly rates and time spent by workers in your own organization. You’ll need to be comprehensive here, so you can get an accurate gauge of how profitable your channels are.

Step 5: Finalize and Compare ROI

Once you know how much revenue each of your channels is bringing you, and how much you’re spending on them, you can calculate your return on investment (ROI) for each one. At this point, it should be easy; simply compare your monthly generated revenue to your monthly costs, and you should end up with a positive figure that you can compare to figures calculated for other channels. Higher-ROI strategies are inherently more profitable than their low-ROI counterparts, and should, therefore, get more of your budget and attention.

This method can help you determine which of your channels are most profitable at a high level, but keep in mind that marketing channels sometimes have benefits that are harder to measure. For example, one channel may be highly effective at raising brand awareness and improving your brand’s reputation, but these subjective qualities are hard to incorporate into an objective model of profitability. You’ll also need to consider the growth trajectory of your strategies; some marketing campaigns start with a low ROI, but gradually become more profitable over time. Make sure you keep these subjective benefits in mind when comparing your marketing channels.