Marketing ROI is one of the decisive issues when setting up both online and offline advertising campaigns. By this term we mean everything related to the calculation of return of investment.
That is, the return on investment, how and whether a given promotional activity managed to pay for itself and generate profit. An entrepreneur should always think in terms of ROI Marketing.
Because it is thanks to the ROI parameter that decisions are made, So you can understand whether indeed a given promotional work, with the related investments in terms of time and economic resources, has yielded the right results. Do you want to calculate the return on investment and understand whether your business is benefiting from everything you are organizing with your agency, your team, or simply your expertise? Here are a few details to address to explore this topic further.
What is ROI Marketing, a definition
ROI – return of investment – is a key KPI for evaluating the goodness of an advertising strategy because it indicates the profit made from a given activity.
Thanks to this metric, which is so important for those involved in digital marketing and web performance, a company or freelancer can decide whether a promotional activity has reason to exist.
This applies from billboards to Google Ads-you can figure out whether all of it has generated a profit. But he or she can also draw other strategic considerations, such as whether an ADV channel is constantly improving or creating a comparison between two or more activities.
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How ROI is calculated, here is the formula
Marketing ROI is defined through a simple math operation: gain generated by an investment minus the cost of everything that was necessary to achieve that result. Return of investment is a decisive performance index that meets this basic formula:
ROI = Net Return on Investment/Cost of Investment × 100
ROI, looking at the chart at postclick.com, is calculated by dividing profit derived from the business and capital invested, multiplied by 100 so as to have a percentage value to adjust for circumstances. One aspect to consider is the fact that this formula is not always simple to apply.
This is because ROI Marketing should be based on being able to get a clear parameter against how much was earned, the same goes for what was spent. You also need to know that not all promotional activities, such as storytelling or brand awareness, can be measured.
Or at least not all of them are based on the same precision with which social media strategy, SEO or Google advertising is evaluated. Here are some useful thoughts to address the topic of ROI Marketing.
5 useful principles for ROI Marketing
It’s easy to talk about ROI in general terms. But how do you apply this useful metric for key performance indicator (KPI) analysis in a conversion optimization journey? What to know to improve CRO, conversion rate optimization, through the use of ROI Marketing?
Don’t confuse ROI and ROAS, you risk failure
This is a key point to address: never replace return of investment with ROAS. That is, the Return on Advertising Spend.
This metric applies only in the case where one wants to obtain, for a job on ADV, the difference between profit obtained from an advertising campaign and its total cost. It seems clear, then, that we are talking about completely different metrics: still useful but for different purposes.
Contextualize ROI in the strategy outlined
Here is another problem well known to those in the digital marketing industry. Even if the formula to calculate is known and well defined, there is always one aspect to consider: we are talking about theory. In practice, the formula needs to be adjusted and contextualized so as to achieve the best results.
For example, the ROI formula changes when it is necessary to calculate the return on investment for recurring sales. In this case, customer lifetime value must also be considered.
Adjust ROI to the circumstance in which you are operating
The job of managing Marketing ROI can cross some minor inconveniences. For example, return of investment is clear when it comes to advertising and digital advertising. But can the same be said about SEO? Yes thanks to Google Analytics goals that are always a guarantee.
What happens, however, with all those activities that affect brand growth? Can the community management process be measured clearly? It is not always so easy.
Manage ROI with the right tools for the circumstance
There are many tools you can develop to enable proper ROI in digital marketing. For example, you can use proper integration with Google’s Search Console that allows you to identify clear results in terms of search engine optimization. But Google Analytics is also needed.
This platform, in fact, provides important data to evaluate the achievement of goals, and Google Tag Manager allows you to activate useful dynamics and necessary changes. Add to this Facebook Ads and all the other tools that allow you to organize data.
Don’t continue without having ROI in the strategy
Small note but always useful to give a clear reference for the work to be done: marketing ROI needs clear numbers to identify the return on investment. You can give up many aspects of your marketing activity, but not return of investment. This is a cornerstone of your work.
Must-read: what is the priming effect of a website.
How to tell and show ROI
There is another point to make: results must be defined and organized. Often those involved in performance optimization and KPI monitoring – ROI being one of the most important – tend only to record data and present it in a cold, aseptic way. This is a starting point, no doubt.
