In this article we cover:
What is ROI?
How to calculate Return on Investment?
How important is ROI?
6 metrics that matter when calculating Return on Investment
ROI Analysis
What is ROI?
To begin with, you should know that the acronym ROI in English means Return on Investment. Basically, ROI is the relationship between the money gained or lost when making an investment and the amount initially invested.
The ROI calculation formula is used to analyze the economic viability of your company's investments. For example, in Marketing it is used for campaigns, events, advertising, among others. This indicator is essential for analyzing the performance of your marketing department from a financial and budgetary perspective.
How to calculate Return on Investment ?
In a direct and simple way, to calculate the Return on Investment, you must use the following formula:
ROI = ((Revenue generated – Campaign costs) / Campaign costs) * 100
Exactly, simply calculate the Net Revenue that a given marketing action generated (Revenue generated – Campaign costs), and divide it by the total cost of the campaign. The result of this calculation must be multiplied by 100 to obtain the percentage of return generated.
It is important to emphasize that the ROI formula only considers the costs and revenues generated by that action or investment, and not the company's total costs and revenues, therefore, each action must be evaluated individually.
How important is ROI?
It is essential to calculate the ROI of the actions germany business mailing list taken as it allows you to analyze past investments and facilitates decision-making about future investments. In other words, it allows you to make decisions based on data.
Think about it: if you don’t know what return marketing is bringing to your company, how will you be able to define a budget that is fair and that allows the team to implement the necessary actions to generate returns? To view Marketing as a strategic investment, it is critical that you understand what return it is bringing and how you can measure it.
When well-designed, Marketing management shows Top Managers how important the actions taken were and the value they generated for the company.
6 metrics that matter when calculating Return on Investment
Here are some of the main metrics that should be analyzed:
Customer Acquisition Cost (CAC)
Customer Lifetime Value
CAC Return Time
Percentage of Customers Generated by Marketing
Percentage of Customers Influenced by Marketing
Cost per Lead
Did you know that there are more metrics that can help you make decisions and be more aligned with your Sales team? Check them out here!
ROI Analysis
To measure the return on investment, it is important for each company to clearly define its objectives. It is also necessary to consider the waiting time to obtain the first results of each action, the length of the sales cycle, etc., and that there is frequent monitoring to make corrections and optimizations.