Remember the time when companies need not spend on advertisements to promote their products? You don’t? Ah yes, because there was never a time like that. Whether you are a start-up or an established company, if you want your ideal customers to buy from you or to subscribe to your service, advertising is essential.
This means you have to shell out that dough. In short, you invest. But how do you know if you are getting positive results out of your advertising costs? That’s where the concept of Return on Investment comes in.
Table of Contents
What is Return on Investment?
When to Use ROI
Calculating ROI in Marketing
ROI versus ROAS
ROI in Different Aspects of Marketing
How to Track ROI?
Pros and Cons of Using ROI
How to Improve Your ROI
Spending money on promotions and advertisements is necessary for you to earn from your own products (or someone else’s, if you’re into affiliate marketing). With careful planning, you can really profit from your efforts.
But how effective exactly is your marketing strategy? Would getting a revenue of $101 after spending $100 be good enough for you? That is still a profitable campaign after all, isn’t it? However, that’s just $1 net profit, an ROI of merely 1%!
Let’s translate this to a bigger investment. A 1% ROI means if you spend $100,000, you will get back $101,000 revenue, for a net profit of $1,000. Is that good enough?
The difference between a pro marketer and a newbie is how well the former values and monitors his investment. He knows that it’s not just about turning your campaigns green; it’s about making the most out of what you shell out. That is what the ROI is for. Let’s talk about what this metric is and how to use it to guide your marketing efforts.
What Is Return On Investment?
Return on investment (ROI) is a ratio used to compare a marketing strategy's gains to its losses. It is a financial metric that is well-known amongst marketers to measure the probability of gaining a return when you spend. ROI is also important when evaluating how much profit can be made from an investment and comparing this profit with other investments.
When calculating the gains against just the advertising costs (ignoring maintenance costs, salary costs, and other incidental costs), the ROI can also be called ROAS, which is short for Return on Ad Spend.
Return on investment helps you calculate and monitor your investment's effectiveness in generating income and making a profit. When investing time or money into your business, you always have an idea of what you want to gain. This idea should be your goal. When you have set your goal, you'll need ways to measure and monitor the investment to ensure you're achieving your goals.
Calculating ROI is a method of checking if your marketing decision is paying off.
Your Return on Investment can show you what works and what doesn't. It would allow you to make the necessary changes to your business as a whole or even to just one marketing campaign in order to gain more profits. And since many variables surround it, ROI constantly changes.
Think about it like this: if you outsource work to an external company, you'll need to think about these points:
- Is the money paid to the company leading to an increase in the generated income? (Revenue)
- If it is, then by how much as compared to the cost? (Net Profit)
- For every dollar spent on the company, what extra returns in profits have been achieved? (ROI)
When talking about ROI or ROAS in marketing campaigns, a similar concept applies:
- Is the money used for advertising leading to an increase in the generated income? (Revenue)
- If it is, then by how much as compared to the cost?
- For every dollar spent on advertising, how much revenue is generated? (ROI)
Now that you have an understanding of what ROI, let’s talk about when you should look into this metric.
When To Use ROI
Although it’s a useful measure of performance, ROI need not be monitored all the time. Below are some of the cases when you should use ROI:
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To determine the value of one or multiple investments.
If, for instance, you invested in a tech company and you feel the need to know the value of it, you can employ multiple calculations to tell if you're profiting from the investment, along with how much you can invest further to improve the company.
In essence, it allows you to determine the present and future value of the assets you gained.
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Determine the income rate by total capital invested
The total capital invested represents a value that centers entirely on the number of cumulative assets you have to put into your business. In order to accurately calculate the financial standing of your business, you will have to place emphasis on net income, taxes, interest, and liabilities.
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To trace marketing efforts
This is the most tangible and most common application of ROI. As a marketer, you can employ ROI calculations to know how successful your outreach to prospects is.
By evaluating your company’s marketing efforts, you can also learn how successful the company's sales team is in getting more customers on board to use the products or services. In general, businesses can tell the impact of ROI on their operations and make adjustments accordingly.
If you’re an individual marketer, let’s say you’re an affiliate marketer, the ROI can help you determine which among your advertising campaigns are working better than the rest. You’ll then know which campaign to assign more budget to, and which ones to cut off.
How To Calculate ROI in Marketing
Due to how versatile and simple the ROI is, it has become a popular metric. Basically, ROI can be applied as a fundamental measure of how profitable an investment turns out to be. This measurement could be done to find out the ROI on a stock investment, the ROI brought about in a real estate agreement, or the ROI a business expects from expansion.
In marketing, the ROI is the result of advertising cost and efforts.
Calculating ROI is not a complicated process, and you could easily interpret it to suit different business applications.
If you arrive at a positive ROI, it means the investment is probably worth it.
If you arrive at a negative ROI, it either means you are losing money, or the investment has not yet paid off (but can be expected to).
Hence, ROI should not be a metric evaluated alone.
Investors can use the signals gotten from ROI calculations to eliminate or choose the best business options, especially if there's more than one opportunity. Just as a positive ROI signals a net profit, a negative ROI implies a net loss and should be avoided by all means based on a given time or investment frame.
Steps to Calculating Marketing ROI
Oftentimes, the ROI calculations may vary depending on the industry you're dealing with and what you choose to invest in.
You can take the following steps to calculate your marketing ROI:
Step 1: Determine The Revenue And Expenses
First off, you have to know the amount of money your company gets as revenue, and what spends on marketing expenses. You can get these values by reviewing your company's financial statements.
If you’re a solo marketer, then just look into your media buying costs as well as ad creatives (which can include staff salary, creative development, landing page hosting, and more).
Let's assume you arrived at a marketing expense total of $8,000, along with a revenue of $15,000.
Step 2: Find the difference between the revenue and investment
Find the difference between the values gotten for total revenue and investment. If you subtract $8,000 in expenses from $15,000 in revenue, you will get $7,000.
Step 3: Divide the value gotten above by the investment
To arrive at the ROI ratio, divide the value gotten above, which is $7,000 in this case, by the total amount spent on marketing (which is $8000).
$7,000 ÷ $8,000 = 0.875
Step 4: Get the Percentage
Multiply the result of Step 3 to 100 to get the percentage. So continuing with our example:
0.875 x 100 = 87.50%
The ROI for our example is therefore 87.50%.
In short, the formula for calculating ROI is:
Interpreting the ROI Result
There are a few things you should keep in mind when calculating ROI. First, you should always remember that ROI is usually expressed in percentage because it is easier to understand than when expressed in a ratio.
If the result is a positive value, you’re profiting from the investment. If the result is a negative value, then you’re losing from the investment.
Why should ROI be in percentage?
There are two main reasons (and benefits) for this:
1. So that you can properly evaluate how good the investment is, without being deceived by the numbers.
For instance, you may have invested $2,000 and then earned $2,100. You have profited a total of $100, which is not that bad. You may even conclude that your marketing strategy is perfectly profitable and you should continue along the same vein.
But if you look at it from the point of view of percentage, you will see that you have actually just earned a meager 5%.
2. The ROI in percentage format also allows you to estimate your potential revenue if you spend higher or lower (assuming all factors remain constant).
Imagine if you consistently get an ROI of 5%. If you spend a hundred thousand dollars on the marketing campaign, you can expect to profit $5,000.
The purpose of ROI is to ensure that for every penny you spend on a marketing campaign, you make more than that penny. The definition of a good ROI is determined by the type of marketing strategy used, distribution channels, and the industry you have targeted.
It is difficult to determine a single overall marketing ROI benchmark; this is due to how vastly different marketing tactics are.
ROI versus ROAS
The terms ROI and ROAS are prevalent in both digital marketing and online advertising campaigns; if you are involved with this, you are likely to have seen them a couple of times.
Whilst they can be used interchangeably, there is a noteworthy difference between them. ROI is the metric for appraising the success of multiple channels; however, ROAS has become the standard metric for businesses that rely on digital advertising.
ROAS stands for Return on Advertising Spend.
This is the amount of return generated by an ad or a campaign versus the amount of money used to fund that ad or campaign. ROAS gives you the information required to determine the effectiveness of a specific ad or campaign, allowing you to decide if continuing to invest in the ad or campaign is worth it.
As compared to ROI, ROAS is concerned only with the direct spend rather than any cost incurred by the online campaign. ROAS only includes ad cost but does not take into account the cost of preparing and hosting the landing page, the cost of preparing the ad creatives, the salary of team members who manage the campaign; practically any other cost associated with promoting your product, service, or offer.
In summary, ROAS is the preferred metric to use when evaluating if your ads and traffic sources are effective at driving traffic, clicks, and revenue. So remember the formula
To highlight the differences between ROI and ROAS, let's look at an example of how they work in practice.
Imagine Business A makes $50,000 in revenue and has an expenditure of $30,000 on ads. Also, the cost of personnel, utilities, and so on amounts to around $25,000. Using the formulas indicated in the previous section regarding calculating ROI, we come up with the following:
For ROI
Total Cost: $25,000 + $30,000 = $55,000
Total Revenue: $50,000
Computation: [($50,000 - $55,000) / $55,000] x 100 = -9.09%
For ROAS
Ad Cost: $30,000
Total Revenue: $50,000
Computation: [($50,000 - $30,000) / $30,000] x 100 = 66.67%
From the above, ROAS has an overwhelmingly positive figure. This indicates the ads are very effective, while the ROI shows that the project, on the whole, isn't bringing in any profit to the business.
As a matter of fact, Business A is running a loss on their campaigns. This indicates the importance of checking on and updating your ROI and ROAS when running a digital ad campaign. If not, it is possible that you end up investing a large sum of money into a campaign that generates an overall loss for your company.
In the same vein, you could find out that your marketing strategy works really well, you just need to cut costs elsewhere.
It is essential to keep in mind when considering ROI versus ROAS that it isn't a situation where you use one or the other. ROI focuses on helping you understand the long-term profitability, whereas ROAS optimizes short-term marketing strategies, so they can come hand-in-hand.
To build an effective campaign, the ROI and ROAS formulas have to be both utilized. ROI offers insight into the whole profitability, while ROAS can be used to single out strategies that can assist in improving your digital marketing efforts and generate more revenue and clicks.
ROI In Different Aspects Of Marketing
The CMI (Content Marketing Institute) once published that determining ROI has been a mystery to marketers for a long time. The creation of tracking URLs and similar technology has assisted greatly in determining the level of success of content. CMI also suggests viewing ROI from a long term angle and factor in other non-financial gains, which includes the growth of the audience.
As previously mentioned, ROI can be evaluated differently depending on your industry, offer, and even marketing strategy. While we can easily deduce what can be counted for as revenue, collecting data on expenditures is a different matter. Your costs depend largely on what directly impacts the marketing strategy you are utilizing. Let us discuss some of these.
ROI for Content Marketing and SEO
In the 2018 State of Inbound Report by Hubspot, it was discovered that 82% of marketers who use Inbound Marketing Strategies in their blogs witnessed a positive change in their ROI. Inbound marketing includes anything that can attract people to visit your website (hence, attracting them ‘inbound’). This includes newsletters, whitepapers, blog posts, video how-to demonstrations, and more.
Image by Hubspot
The biggest portion of content creation is allotted to written content, primarily blog posts. This is actually part of SEO strategies (which is highly prioritized).
Video content is so much more popular with audiences as compared to written content. However, the former requires a bigger budget than the latter, to the tune of ten times! That is not to say that blog posts come cheap, oh no.
There are several costs to calculate if blogging is in your marketing strategy; these costs include Production costs, Promotional costs, and time-related costs. These costs need to be added to your total spend. If you want to calculate the time spent in dollar amounts, you need to monitor the number of hours an employee spends on the project and calculate that with the hourly wages.
For instance, if a content writer is paid $40 an hour and takes six hours to write a promotional article for your brand, your total cost will be $240 in labor, including all costs related to the post's promotion.
One of the main concerns is tracking the profitability of organic content. There are some techniques utilized to do this, but it’s not foolproof.
For instance, if you link your blog to an offer page, it is advisable to make use of tracking URLs. This allows you to record not just the numbers of visitors arriving at the page through your blog, but also other click information such as where the user is located, his ISP, device, what marketing campaign led to the visit to the blog post then to the offer page, and more. If you use Google Analytics, this can be done by incorporating UTM tagging into your links.
The importance of tracking customer conversions, visits, and leads connected to an article or any content marketing effort is to see how effective your strategy is. If you realize that the time it takes to create ROI generating content is unreasonably long, it is necessary to find out how to streamline the writing process. If your content fails to generate ROI, necessary adjustments to your existing marketing strategy would be needed or create a new strategy.
It is not to be discounted, though, that SEO strategies and organic traffic can help you gain more free visitors in the future. The results are not immediate, but definitely worth the wait.
Organic Written Content ROI Calculation Sample
A divorce law firm wants to attract more clients. They write seven blog posts about human rights and tag a tracking URL to each post that links to the landing page, offering free legal consultation to prospects.
The firm paid $400 for blog posts to be created, and an additional $700 for SEO optimization of their website and these blog posts. After three months, the posts start receiving organic traffic and direct traffic from inbound links.
Because of these, the posts succeeded in generating twenty leads, and two of the leads became clients. On average, the firm earned $1,000 for every client.
Here's how they calculated their ROI:
Total Cost: $400 + $700 = $1,100
Total Revenue $1,000 x 2 = $2,000
ROI Calculation: ($2,000 - $1,100) / $1,100 = 0.818 x 100 = 81.8%
The firm received 81.8% ROI from their organic marketing efforts in a span of three months. The firm would have good reasons to continue using the strategy because the return rate works for them.
However, if they expect their ROI to be 100% every three months, then they should increase their SEO efforts more. The advantage of SEO is that there is minimal cost over the next few months if they plan on just relying on the initial blog posts they created.
ROI for Paid Marketing
Return from Investment is easier to compute with paid marketing than for content marketing, for the simple matter that all expenses and revenues can easily be detected. Most paid marketing efforts can be calculated in the same way.
There are two cost factors in paid marketing, and these are:
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Ad Expenses
This is a straightforward expense. It is the direct cost associated with your promotion using whatever paid traffic type you choose.
If you are using a self-serve advertising platform, this is simply the cost of traffic. If you are using a managed traffic service, this includes the cost of ads as well as the management fees.
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External Expenses
This is the cost outside of what you’re actually paying your traffic source. The reason why these expenses are not automatically added is because these can be time-bound, re-used for other paid marketing campaigns, or used partly for non-paid marketing efforts.
In short, although these are part of the cost of your advertisements, quantifying them for the specific advertising campaign you want to compute can be tough. But if you will be computing the ROI of all your marketing campaigns, then adding up these expenses is easy.
Here are some examples of marketing expenses made outside of advertising:
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Product Development
This is the cost of creating your product or coming up with the service you want to provide. This includes product research and manufacturing.
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Raw materials and logistics
If you have a physical product, you also have to take into consideration the cost of raw materials, packaging, storage, and handling costs.
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Webpage Hosting
This is the service that provides remote storage for your website or landing page. This cost varies on the amount of storage you buy, the features of the storage (whether it’s shared hosting or dedicated hosting), and how long you want to use the service (usually in years).
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Landing Page Creation
This is the cost of building the page that your link redirects to once the ad is clicked. If you are using a landing page builder, the cost depends on how the lander builder charges you (either on a per-page basis or on a subscription basis).
If you are having someone do this for you, then the cost would be how much you are billed by the LP creator. Do you have a team member working on the LP building themselves? Then the cost will be equivalent to the amount of time your team member or staff spent on this.
If you have coding knowledge, you can always build the landing page yourself. However, do not make the mistake of assuming that if you create it yourself, it is considered zero cost. Your time is worth something, so make sure you compute the hourly dollar amount of your time.
When building your own lander, don’t forget to follow the best practices. Have a look at our guide on how to create landing pages that convert really well.
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Ad Creative Development
Whatever ad format you choose, you would need to develop an ad creative for it. For instance, if you are promoting your offer via native advertising, you would need an image and an effective ad headline.
Again, this cost is calculated based on the number of hours you allot for this, or how much you pay if you outsource this task.
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Management Hours
This is the cost of setting up, managing and optimizing your ads.
How to Track ROI?
When utilizing online ad strategies, the ROI data is automatically tracked if you use a tracking tool. A tracking tool records both the ad spends and the conversions with a corresponding value. This can be done by linking your traffic source and your business website (or affiliate network) into the tracker.
Let’s not go far with our example. Here at Brax, you can integrate Google Analytics or Voluum, whichever you prefer. You can also link it to your native ad traffic sources such as Outbrain and Yahoo Gemini, to name a few. As such, we can help you properly track your native advertising costs, and therefore, automatically calculate your ROI.
Otherwise, if using other strategies, such as content marketing, for instance, it would be hard to track the ad return if your blog post or videos lead directly to a purchase. This is highlighted further when the content isn't linked to a landing page.
In order to set up a good ROI benchmark for the various marketing strategies you employ, you need to compare the return from similar tactics you have used previously against your sales number currently. The information obtained from the comparison should assist in creating the ROI benchmarks and goals that are suitable for your business.
Using Trackers to Measure ROI
What’s great about calculating ROAS for paid marketing is that you can trace everything. If you have a good enough tracker, then optimizing your marketing tactic becomes easier.
Let’s get something clear, though. Almost all advertising campaign trackers refer to Return on Ad Spend (ROAS) as equivalent to Return on Investment (ROI) because ROI within these trackers only considers the cost of advertising being tracked. So do not be surprised if you see ROI under one of the report columns.
Here in Brax, ROAS is displayed as part of the Calculated Metrics.
It’s important that your tracker can also monitor the conversions accurately in order for it to calculate the ROI accurately as well.
With an ad management service like ours, you can even automatically optimize your campaigns based on click-through rates, conversion rates, and most importantly, Return on Investment. You can do so by setting up rules, which are available based on the network you are buying traffic from.
Trackers are extremely useful in helping you immediately see your ROI for a specific period. There would be no need to manually compute performance metrics, especially ROI; hence, saving you time and effort. It also allows you to monitor multiple advertising campaigns and to split-test ads to find the best-performing ones with just one look.
The downside to using tracking tools is that you cannot include external costs. Only ad traffic costs are monitored and taken into account.
The Pros and Cons of Using ROI
ROI is an important performance metric. Here are some of the reasons why you should not leave it behind when evaluating your marketing strategy:
Advantages of ROI
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Straight-forward and Simple to Calculate
The ROI metric is used frequently because of how easy it is to calculate. It requires only two figures – the cost and the benefit. The term "return" means various things to different people. Hence, ROI has no strict definition of it. This makes the ROI formula very easy to use.
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Globally Understood
ROI is a globally understood concept, so using this metric nearly guarantees that people know exactly what you are referring to. If you need to present a report to your boss or your client, you can be sure that ROI is one of the things they would be looking to assess your marketing performance.
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Displays your success in investing
The ROI metric shows how successful you are in investments, whether it be in the stock market, for product development, and of course, advertising. The returns determine the quality of the investment.
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Provides a detailed and up-to-date financial picture of your company
ROI charts a trajectory of where your business is headed in areas like marketing and sales. Ensure to check your financial statements occasionally to see all the assets from all your business activities.
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Describes where improvement needs to be made
After going through your financial statements, you should be informed on what departments could boost their performance and which ones may need an increase in staff employed or an upgrade to the technology used to complete various tasks.
In the case of advertising, you would need to evaluate ROI hand-in-hand with other performance metrics.
For example, a high ROI with a low CTR means the campaign is profitable but the ad is not attracting more people. This means you need to adjust your ad creative or maybe even increase your budget.
If you have a low ROI but a high CTR, this means your audience is not responding to your offer. You can either improve your marketing funnel, adjust your landing page, or even double-check the target persona you crafted for your marketing strategy.
Disadvantages of ROI
As useful as the ROI measurement is, it has a few disadvantages. These are
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Not time-bound.
As if it focuses more on the ad cost and revenues, it fails to take into account the duration of the period in which an investment has been made. This can be an issue when investment alternatives are to be compared.
For example, investment Y has generated an ROI of 30%, while investment Z produces an ROI of 20%. It is not right to assume that Y is the better investment unless the time frame by which the return occurs is also known.
If investment Y generated an ROI of 30% within five years, while investment Z generated an ROI of 20% in one year, then it can be argued that investment Z is a better choice.
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Does not adjust for the risk involved.
It is widely known that investment returns are directly linked with risk: the higher the return's potential, the greater the risk involved. This can be seen firsthand when observing the investment world, small-cap stocks usually have a much higher return than large-cap stops, but they have a considerably more significant risk.
For example, an investor who chooses an investment with a portfolio return of 15% would have a significantly higher grade of risk than an investor who decides to go for an investment with a return of only 5%. Suppose an investor is focused on only the ROI of a portfolio without also assessing the associated risk. In that case, the outcome of the investment might vary greatly from the result expected.
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ROI figures can be inflated if the entire expected costs are not part of the calculation.
This could be done either on purpose or inadvertently. When evaluating the ROI metric, for example, on real estate, all expenses associated with real estate should be included.
These expenses include mortgage interest, insurance, tax, and maintenance. These could negatively affect the ROI by a large amount; if these expenses are not included in the calculation, the ROI figures could be exaggerated.
In the digital marketing world, this can be translated into offline costs, such as product creation, raw materials, logistics cost, and more. This is where calculating all costs outside of your advertising costs come into play.
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Emphasizes financial gains only.
ROI, like all profitability metrics, takes into account financial gains (and losses) only it doesn't account for ancillary benefits. Another ROI metric, called SROI or Social Return on Investment, accounts for the return that cannot be measured financially, such as economic, social, and environmental returns.
How To Improve Your ROI
There are various ways to improve your ROI, but this is dependent on the kind of return you want from an investment. Returns could be in the form of reduced expenses, increased profit, or operational benefits such as increased brand awareness.
Defining what your goals are and setting quantifiable benchmarks will assist in increasing the return of the various initiatives you take in order to improve your business. Below are some suggestion that will assist in improving your returns,
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Define "Return"
Defining what you classify as the potential return or returns that you could get from the investment is the first step in improving your return on investment. Returns could include bigger profits, reduced production costs, higher sales, increased revenues, better customer satisfaction, or increased brand preference.
It is advisable to set up as many benchmarks as allowed for your return goals. For example, rather than setting increased revenue as a goal, set instead increased revenue in a specified month, in a particular area, a specific sales rep, or from a specific distribution channel.
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Calculate Your Current Return
In order to improve the returns on your investment and to prevent the need to pursue other investment opportunities with more cash or effort, you must have calculated the return you are getting from either selling a product, retaining a particular employee, or whatever else you are currently measuring.
For example, your business produces 1,500 units of your product per day with your current workforce, with a labor cost of $5 per unit. If you decide to add either more staff or machinery, you already have a benchmark to measure any changes against while you attempt to improve your return.
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Identify Investments with Potential Benefits
It is imperative to earn returns with excellent margins, but sadly this isn't always possible. One major cause of this is that investors fail to recognize the investments with the potential for higher return policies.
To gain from your investments, it is vital to have insight into the potential investments with favorable returns. Also, the business has to be aware of what medium of returns are the most beneficial in boosting the company's growth.
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Invest in Things that Stay Permanently
There is no preferred thing to put resources into over something that will remain forever with the organization as an advantage. Organizations put resources into things that bring deals for a short time and blur away inevitably, and they misjudge this to be smart investments.
But, investing in discovering some new information or going to a business gathering will teach your members of staff or your directors a few basics about the growth of returns. It will prove to be beneficial to your firm for a more extended period.
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Increase Revenues
One approach to raise your return on investments is to make more sales and incomes or raise your prices. In the event that you can build sales and incomes without expanding your expenses or just raise your costs enough to give a net addition in benefits, you've improved your return.
On the off chance that you can raise your prices without diminishing your business enough to wear-out profits, you've improved your return. Utilizing your estimation of your present return, seek approaches to improve your sales and incomes in manners that give you a more prominent profit than your current business policies.
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Reduce Expenses
Another approach to improve your return is to lessen your costs. If this can be done successfully, there won't be any need to increase your sales or raise your prices in order to improve the return.
Separate your costs into overhead and production expenses to help you discover a better way to reduce expenses. Overhead expenses are non-production costs, for example, lease, telephone, and insurance. Production costs are the costs you cause to make one unit of your item, for example, materials and work.
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Re-Evaluate Your Expectations
It isn't necessary for every investment you make to provide monetary benefits; be that as it may, your investments should give some recognizable advantage.
For instance, on the off chance that you arrange a thank-you party for customers toward the year's end, that won't raise your sales. However, it may grow client loyalty, assisting you in retaining them.
Giving $11,000 worth of benefits to your staff will definitely drain money out of your financial balance. Yet, it may make it simpler to recruit better employees, evidently raise morale, increase efficiency, and assist in retaining essential members of staff. In the event that you run a promoting effort, notwithstanding deals expands, track the new clients you increased, expanded traffic to your site, and expanded attention to your business in the commercial center. Reconsidering your expectations can help you spot elusive advantages to seek after that inevitably increases your profits.
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Improve your Marketing Strategy
As we’ve discussed over and over, ROI is a great performance indicator. To evaluate it properly, you must compare it with the ROI from a different date range, the ROI of a separate ad campaign, or even the ROI of a marketing campaign using different traffic providers.
Comparing ROI helps you understand if your current marketing techniques are getting more revenue or not. You can use this to check what’s changed or what else can be improved. If you are split testing marketing campaigns, your ROI can indicate which one is performing better.
Conclusion
Return on Investment (ROI) is a straightforward and instinctive measure of how profitable an investment is. Although this metric comes with some limitations, especially the fact that it does not put the holding period of investment into consideration and is not suitable for risk, ROI is still very crucial to business analysts in evaluating and ranking investments.
From the perspective of a marketer, ROI is the gold standard. The goal is not just to achieve a positive ROI, but to improve the return on investment based on previous campaigns or A/B Testing.
A pro marketer will use this metric not just to evaluate performance, but to help him act on improving the circumstances surrounding the investment. In short, he will optimize his ads to get more out of the same ad spend.
If you haven’t yet, it’s time to start focusing on improving the ROI of your native advertising campaigns. We’re here to help you! Just send us a message at love@brax.io and we’ll show you how.
