What Is ROI in Marketing?
In business terms, return on investment, or ROI, is one of the most important indicators of success. The case is similar for marketing departments. ROI in marketing is one of the most important financial indicators for revealing whether marketing activities are successful. Put simply, when revenue can be attributed to marketing activities, marketing departments can rest assured that their work is paying off for the company.
How to calculate marketing ROI
Calculating marketing ROI involves a simple formula. To calculate marketing ROI, first take the return amount and subtract the cost of the marketing investment. Then take this number and divide it by the cost of the marketing investment. Marketing ROI is typically calculated using a percentage and is most easily calculated in relation to a particular campaign, where revenue can easily be attributed to specific marketing activities.
Calculating overall marketing ROI for a company can be more complicated, in part because all revenue generated by a company is not necessarily attributable to the marketing department’s activities. For this reason, when calculating return on marketing investment, it is usually necessary to subtract organic growth from sales growth before subtracting marketing investment.
In order to calculate marketing ROI, you’ll need to access marketing analytics that give you information about sales and conversions that are directly linked to your marketing activities. Many marketers use web analytics to determine marketing ROI when they should instead be using marketing analytics that give information about traffic, leads, conversions, and sales.
Why is marketing ROI important?
Marketing ROI is an important metric for marketers to track in order to quantify the results of campaigns and ad spend and justify and plan their future marketing budgets. Those that result in higher ROI are likely to be replicated, whereas those that result in lower ROI or loss to the company should be adjusted or eliminated.