Every investment in a company should bring profits in the short or long term, regardless of whether we are talking about the purchase of fixed assets, advertising or courses for staff. However, we are not always able to assess whether a given element has brought benefits to the company. Is this particularly difficult in marketing investments? The ROI indicator will help in assessing the usefulness of activities in the company. What is it? How to calculate ROI?
Evaluating marketing activities is often difficult to estimate. It is difficult to precisely determine how SEO, influencer marketing or social media activities actually translated into sales. This can be done using various types of indicators. One of them is ROI.
Contents
- What is ROI?
- How to calculate ROI? What dataset to look for?
- Interpreting the ROI indicator – the most important information
- Is it worth paying attention to the ROI indicator?
What is ROI?
ROI is an abbreviation from English. The get to know – mackenzie finlayson phrase “return on investment” simply means “return on investment” . This indicator is used to assess how effective marketing activities are and indicates the assessment of the profitability of promotional projects, strategies, and the use of advertising.
Properly calculated actions based on the ROI indicator can make it easier to measure the amount of return from a given marketing campaign. It determines how effective the investment is in relation to its costs. Is ROI a measurable indicator? Of course, it is difficult to say that ROI is an indicator that is the only exponent of how profitable a campaign is . However, it is one of the most important elements that allow for estimating how marketing activities translate into success in the company.
How to calculate ROI? What to look for?
Calculating the ROI requires singapore number determining the total profit from recent activities (this may be the company’s profit from a sales campaign conducted during that period) and the costs of conducting marketing activities . The ROI result is expressed as a percentage or a numerical ratio, depending on the need.
What is the formula for ROI?
ROI = (revenue – cost of goods and services sold) / cost of goods and services sold x 100%
In this case, revenue means the amount we received for a given product in a given period. For example, if the marketing campaign included the sale of construction services in the period from March to July, it is the profit from such services that should be included in the calculation of the ROI indicator . When it comes to the cost of goods and services sold, in this case we include both the cost of producing the product, storing it and handling the sales, as well as the cost of the marketing campaign that we implemented in a given period.
Let’s try to show the effects of calculations with an example. Let’s imagine a product whose production cost is PLN 1,000. The sale of a single product unit is PLN 1,600. The product was sold in the number of 5 units. This means that the total production cost was PLN 5,000, and the profit was PLN 8,000. Advertising the product in Google Ads cost PLN 1,000.
Total revenue was PLN 8,000, and total costs were PLN 6,000. To calculate the ROI, we use the formula (8,000 – 6,000)/6,000 x 100%. The index was 33.4%, which means that the investment brought profit in this range.
