ROI (Return on investment) is the economic value that you generate as a result of your marketing actions. It is a formula that helps you calculate the profitability of your campaigns, and it is used to know the results of an investment or investments made by your company.
Tracking the return on investment will allow you to know whether the money you have invested in a marketing campaign has generated economic benefits or losses.
Calculating ROI is not an easy task, but it is necessary to measure the impact of your actions. Within your digital marketing plan you should include the analysis part to see if the strategies you have carried out are being fulfilled and giving the expected results, or if on the contrary, it is necessary to make changes to improve.
Throughoutthis post we will tell you more about what ROI is and how to calculate it correctly. We hope you are ready and then you can apply it to your business successfully .
how to calculate ROI?
You probably already know this, but a very important point in the Inbound marketing methodology is to measure the results of your strategies, because what you don't measure you can't improve.
Calculating ROI is very useful to check the profitability of your actions, because it is the relationship between the investment and the benefits generated.
The ROI formula is as follows:
ROI= (Profit - Investment) / Investment x 100
ROI is presented as a percentage, so it is multiplied by 100.
Imagine that you invest £500 to do a course, and you get £2500 profit from it, then your ROI would be 400%, i.e. for every euro you have invested, you have obtained a return on investment of £4 profit.
It may happen that your ROI is negative, which, a priori, means that you will have to make changes and review what is not working. Although keep in mind that you can get a negative ROI because your goal was to achieve a lot of impact and generate a lot of traffic to your website, i.e. you have not generated economic gains, but you have reached your goal. A campaign with negative ROI can be positive within certain contexts.
For future decision making it is important to calculate the ROI, to know if your investments will give you benefits or not. You will have more information to be able to evaluate if your strategies are profitable.
how to calculate ROI in Marketing?
We know that making calculations in a digital marketing campaign can be complex and very confusing. The formula is still the same as we have presented above, but with the benefits and the investments you have made in your marketing plan. Here it is a bit more complicated because you have to take into account all your return (benefits) from each part of your marketing plan and what your investments have been.
Therefore, when talking about investment you have to take into account elements such as:
- the staff you have in charge of each campaign and the hours they dedicate to it.
- technology: cameras, plates, audiovisual production, web platform costs, etc.
- creativity costs
This formula is very useful for your strategies within your marketing plan, for example in social media campaigns, SEM or email marketing. That is, you can calculate the ROI of your total digital marketing strategy, or do it for each section of it. But as in other aspects of marketing, the profitability of your campaigns is not only measured with a value, you need to resort to the KPIs.
why is it important to know your company's ROI?
The decisions you make regarding your digital marketing strategy are well thought out, not taken lightly, so you measure and analyse your actions based on data to help you know if you're on the right track. This is where data like ROI comes in.
ROI is a key indicator of whether the investment you have made is paying off, so you can make better and more objective decisions.
If you have evaluated your past investments and observed how they have performed, you can better plan your next moves.
But as we have explained, it is not always necessary to have a positive ROI. You may want to implement certain strategies even if you know that this data will be negative. Within digital marketing there are a lot of metrics to measure the performance of your campaigns, so you must take into account and look beyond the ROI.
Conclusion, as you have seen, it is necessary to calculate the ROI. The ideal is to calculate this figure for each campaign you carry out and thus be able to defend each action you carry out, in addition to establishing an action plan for each of them.
But don't forget to review this measurement and do an analysis of the ROI periodically, you can't just calculate it once and forget about it, it needs to be reviewed, because you know that in digital marketing everything is constantly changing.
So, ROI is an important indicator for the development of your strategies so you should not forget to calculate it. We encourage you to measure your ROI and observe its result.
we hope you enjoyed the reading!
