Every investor has a financial, social, ethical and environmental purpose, however the one that often weighs tangibly on the investor’s business is the financial costs, although there are other types of costs. So the questions you might ask yourself are: what do I expect to get back at the end of this investment? What efforts: human, intellectual, financial, material, technological and disciplinary would I regret ? How do I calculate the Marketing ROI? How can I increase my marketing ROI ?
1. What is Return on Investment (ROI) ?
ROI (Return on Investment) is a measure of investment performance used to assess the effectiveness or profitability of an investment. It is also used to compare the effectiveness of different investments (products, ranges, marketing campaigns and projects). In simple terms, marketing ROI is a measure of the benefits and costs of the marketing efforts employed. What can support this concept is the net present value of each marketing effort, i.e. the movement or difference between resources and expenditure discounted to present value, which allows the incremental increase in investment to be deducted.
2. Calculating Marketing ROI
The financial mathematics formula is straightforward and objective:
ROI = (Profit – Costs) / Costs. The percentage result shows your percentage growth or loss. It also shows how often your financial strategy is profitable or not.
In marketing, there are several formulas depending on the marketing activity you are investing in. For example, for a product launch.
ROI (Product Launch) = (Sales or Revenue – Investment) / Investment
If you do it per unit then it is: ROI (unit produced) = Billing / investment
Billing = Remuneration; Investment = Effort or cost.
2.1. ROA (Return on attention)
Return on attention, attention has a price, if you can earn attention, you are not far from having engagement.
ROA = (Advertising – Advertising Cost) / Advertising Cost. This will allow you to evaluate how often your marketing advertisement is attractive and captivating.
2.2. ROE (Return on Engagement)
In digital marketing, the main goal is always to achieve a conversion and this only exists if there is a sale, a follower, comments, people talking about your work.
ROE = (Conversion – Attention) / Attention. We’ll limit ourselves here, but there’s a lot to be said about ROE and ROA. Don’t hesitate to contact us.
3. How to use ROI in marketing for decision making?
If your investment has a bad return, you need to review the business strategy in all its levels, do a SWOT or Benchmarking analysis as a first step. For more information, please contact us.
For the advertising campaign with problems, first check if you are addressing the right audience and if so, then review the message, images, music, flyers … or the way it is delivered. More details, we are here to help.
With a track record, it is very easy to make important marketing decisions such as: a new product range, reaching out to a new segment, complementing certain services… for this, you also need a forecast or budget study with a perspective of 6 months for short-term projects and 5 years for the long term. Of course, this may depend on your activity.
4. How to increase ROI?
In order to increase ROI, ROA and ROE, it is necessary to either increase revenues or decrease costs; similarly, it is necessary to prioritise quality of service.
- In a first model, one can opt for the establishment of SMART objectives Specific, Measurable, Attainable, Realistic and with a predetermined time. For example: specify the percentage hoped for; follow up with specific data reporting; their relevance must be undeniable; and determine the time.
- Work out a planned follow-up of everything that will lead you to the expected result with deadlines and don’t be stuck, revitalise your strategy. For example, you should be interested in the costs per acquisition, interest rates, and other factors.
- The level of importance of a customer should never be underestimated, as he is the future ambassador of your brand.
- Google Analytics is an indispensable tool for digital marketing and evaluation.
- Try to identify your customer’s journey to engagement.
- Identify the different possibilities in the market.
- Save time by automating certain tasks.
“A lead is like a bird, if you trap it a lot, it suffocates, if you release it a lot, it will fly away. C. F. Inglês”.
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