Do you want to know if your marketing investments are really worth it? Well ROI is the answer to that question.
Today you will learn what it is and how to use ROI (Return on Investment) in Marketing, a metric that will help you understand how much benefit you have had on each money invested.
Calm down! Don’t be scared if you think they are complex formulas or numbers to analyze, it is very simple.
What is ROI in marketing?
First of all, ROI is a metric that is responsible for analyzing and evaluating the profitability of an investment or a campaign, that is, this measurement shows us how much money has been earned or lost in relation to what was invested.
If you want to know more about its global meaning, you can review it on the blog ROI – Return on Investment: formula, tools and step by step. It’s great!
Now, as a second measure, ROI in marketing consists of identifying that all the efforts that have been made in the marketing area will return to something significant, such as acquisition of leads, downloads of materials, relationships and even sales.
To achieve the above, keep in mind…
Market analysis.
- Reevaluate the strategy according to the results.
- Analyze these two concerns: what was the project or campaign that generated the greatest profit? And did the performance of the marketing strategies obtain the expected results?
- Additionally, if you are a marketer and want to enhance your skills, it is important that you include this term in your learning path.
What percentage of roi is good?
The ROI in marketing can vary depending on the type of strategy, the sector, the campaign and other factors. There is no percentage that is considered good, since a satisfactory ROI can be different for each process.
Generally, a positive ROI means that the investment was profitable and that you should continue investing and keep your eyes on it.
If the ROI is negative, it means that you are losing money on that investment and you have to review what went wrong and how it can be “turned around” to improve it.
In terms of percentage, if the ROI is 100% it indicates that you have recovered what you invested, while if the ROI is higher, that is, greater than 100%, it means that you are making profits.
The important thing here is to measure the ROI in relation to the objectives and expectations established later. You may also consider including other relevant metrics such as conversion rate, acquisition cost, and other KPIs (key performance indicators) that can help you evaluate results.
How is ROI calculated in marketing?
Most marketing areas measure or calculate ROI using a simple formula that includes the benefits obtained with the costs of the investment.
We can see the basic formula of marketing ROI with this example:
Let’s imagine that we have a marketing campaign in which $10,000,0000 was invested and as a result of that campaign, it generated $20,000,000 in additional income.
The ROI calculation would be:
Income generated: ($20,000,000) – Campaign cost: ($10,000,0000) / Campaign cost: ($10,000,0000) X 100
So…
$20,000,000 – $10,000,0000 = $10,000,0000 / $10,000,0000 = 1 X 100 = 100
The final ROI is 100. Which means that the company obtained an ROI of 100% of its investment in the marketing campaign.
Remember that this is a general example, since the calculation of ROI will depend on the costs, time and attributions of the marketing actions.
Calculate your ROI with our customized tool and simplify your process.
To have a successful calculation we have these tips:
Tip 1: It is recommended to periodically calculate marketing ROI to determine the financial health of the company.
Tip 2: To calculate a return on investment in marketing, it is essential to have a prior marketing analysis that provides valuable information about the results of sales, traffic, potential customers and conversions. To carry out this process you can use analytics tools.
Marketing ROI in example…
We have two common references:
Social networks: although it is not easy to exactly measure the ROI in the actions of these platforms, which by the way are widely used in marketing strategies, it is essential to know what action the user performed in order to make the process effective.
Some of these may be downloading materials, filling out a contact form or capturing emails.
Once you are clear about these actions and know what the return is, you will be able to do the measurement and analysis precisely.
Content marketing: evaluating the influence that this strategy has on business results can be achieved using the following metrics or characteristics:
– Paid traffic vs. organic traffic.
– Natural mentions.
– SEO positioning.
– Cost per click (CPC).
After analyzing this, you will be able to identify what type of content attracts the user’s attention and interact with the brand.
Challenges of using ROI?
Interpreting the ROI is essential to understand the profitability of the investment, but you must also know its limitations, these are some:
Adaptation: the market is changing rapidly and so are the demands of users, which is why using ROI will allow us to act precisely.
Patience: be clear about the process times to see the results, do not rush and rather try to carry out continuous follow-ups.
External factors: changes in the economy, the market or even the competition can influence the results and hinder the ROI analysis.
Uncertainty and risk: All investments carry a degree of risk, for example, when calculating the ROI on risky investments, future results may be uncertain.
Despite these challenges, ROI continues to be a very valuable element for companies and even more so for the marketing area, so it is easier to adapt and keep the pros and cons on the table.
ROI and Roas in marketing: are they different?
First of all, ROAS means Return on Advertising Investment, since it focuses on expenses and acquisition in this field.
For the marketing area it is very important, as it analyzes and evaluates the performance of the campaigns and knows for sure whether the advertising strategy worked or not.
Remember that the formula for this indicator is:
Income generated by advertising / Cost of investment in advertising
Now if it is different from ROI, the answer is yes, in very slight aspects, since Return on Investment is a broader metric, it can be applied in different areas and not exclusively in advertising and marketing, such as ROAS, which focuses on the return on advertising investments.
These two metrics are very important, but we recommend going beyond the numbers, which of course give comfort and a feeling of certainty, however, the result of marketing campaigns can reside even in the emotions it awakens in the audience, in look for those human connections.
Success in marketing is also about building memorability in the minds and hearts of the public.