How to analyze ROI and know the profitability of your investment?
Posted: Thu Dec 05, 2024 6:21 am
ROI is a fundamental metric in marketing; in fact, for many, it is the most important metric, as it allows us to know if we have recovered the budget invested in a campaign .
But while the basic formula for calculating ROI is very simple, there are many nuances to actually knowing how to analyse ROI. Let's take a look at all the ins and outs of this metric.
Discover the most important digital marketing metrics . The 130 you shouldn't lose sight of! Click here and download the most complete ebook.
How to analyze ROI and know the profitability of your investment
What is ROI?
If you were asked to choose between running a display list of nepal consumer email campaign or investing that money into your social media presence, which option would you choose and why? Naturally, you would try to choose the one that would have the most benefits for your business, both in the short and long term. And one way to find out would be to calculate the ROI associated with each strategy .
ROI ( return on investment ) is the return we get from an investment, expressed as a percentage. In other words, it tells us how much profit we have obtained for each euro invested.
ROI is used in all types of businesses to quantitatively measure the benefits of an investment, as well as to compare different investments with each other.
How to analyze return on investment
There are several different ways to calculate ROI, and some are better suited for certain types of businesses than others. To calculate the ROI of a marketing campaign , we can use any of these formulas:
Formula 1: Net return on investment / Cost of investment x 100
Formula 2: (Final value of the investment - Initial value of the investment) / Cost of the investment x 100
As you can see, these formulas are very simple, but there are several complexities to consider when calculating the ROI of a marketing campaign. That's why we may need to turn to a marketing analytics or business accounting expert to help us get an accurate figure.
The reason for this is that to get the final ROI figure, we have to make different assumptions and adjustments, for example, the number of monthly sales we would have had without that campaign. It is important that these calculations are accurate, because they allow us to evaluate the results, measure the impact of marketing campaigns and make more accurate predictions.
But while the basic formula for calculating ROI is very simple, there are many nuances to actually knowing how to analyse ROI. Let's take a look at all the ins and outs of this metric.
Discover the most important digital marketing metrics . The 130 you shouldn't lose sight of! Click here and download the most complete ebook.
How to analyze ROI and know the profitability of your investment
What is ROI?
If you were asked to choose between running a display list of nepal consumer email campaign or investing that money into your social media presence, which option would you choose and why? Naturally, you would try to choose the one that would have the most benefits for your business, both in the short and long term. And one way to find out would be to calculate the ROI associated with each strategy .
ROI ( return on investment ) is the return we get from an investment, expressed as a percentage. In other words, it tells us how much profit we have obtained for each euro invested.
ROI is used in all types of businesses to quantitatively measure the benefits of an investment, as well as to compare different investments with each other.
How to analyze return on investment
There are several different ways to calculate ROI, and some are better suited for certain types of businesses than others. To calculate the ROI of a marketing campaign , we can use any of these formulas:
Formula 1: Net return on investment / Cost of investment x 100
Formula 2: (Final value of the investment - Initial value of the investment) / Cost of the investment x 100
As you can see, these formulas are very simple, but there are several complexities to consider when calculating the ROI of a marketing campaign. That's why we may need to turn to a marketing analytics or business accounting expert to help us get an accurate figure.
The reason for this is that to get the final ROI figure, we have to make different assumptions and adjustments, for example, the number of monthly sales we would have had without that campaign. It is important that these calculations are accurate, because they allow us to evaluate the results, measure the impact of marketing campaigns and make more accurate predictions.