Blog Details

ROI Blog

Return on Investment

Here's everything you need to know about ROI and how to use it to ensure that your business spending is increasing your earnings.

• ROI stands for return on investment
• You must calculate the appropriate ROI for each investment
• ROI can be calculated in a variety of ways
• This article is for managers or business owners who want to know what ROI is and how to calculate it

Launching a new marketing campaign should test whether the project's cost is beneficial or detrimental to your company. Many marketers consider ROI or return on investment when determining the profitability of a product or service. At its most basic, ROI compares the amount of money spent on a project to the amount of revenue generated by it.

Return on investment (ROI) is a performance metric used to assess an investment's efficiency or profitability or to compare several investments' efficiency. An investment's ROI can be calculated as the return on an investment divided by its cost.

The benefit (or return) of an investment is divided by the cost of the investment to calculate ROI. The outcome is given as a percentage or a ratio.

The goal of ROI is to earn more than one dollar for each dollar spent on a marketing campaign. What constitutes a "good ROI" varies depending on the type of marketing strategy, distribution channels, and industry.

Determining your digital marketing ROI is more complicated than simply looking at how much money various campaigns bring in and comparing it to the cost. Not all campaigns have a conversion goal at the end. Some campaigns are designed to raise awareness. Others attempt to draw customers into the marketing funnel. Finally, your specific goals will determine how to measure digital marketing ROI. Google Analytics provides so much information that it may make your head spin.

When comparing ROI data, you should avoid comparing data from month to month. Month-to-month comparisons do not account for certain anomalies or factors such as seasonal demand. Examine year-over-year comparisons instead. These will provide you with a better understanding of how your digital marketing campaigns are progressing over time.

What is a good ROI in Digital Marketing

Depending on what ROI you are measuring, it may be beneficial to investigate industry benchmarks for specific KPIs relevant to your business. The average conversion rate for Google Adwords advertising is around 2.4 percent, with the top 25th percentile producing a conversion rate of 5.3 percent and the top tenth percentile producing a conversion rate of 11.4 percent.

It's also worth noting that your order value will be highest for direct and search traffic, as well as email marketing. Social media typically produces the lowest order value. Tools like MailChimp publish reports on email marketing conversion rates that include appropriate ROI benchmarks based on company size, industry, unsubscribe rates, open rates, and click-through rates.

In addition to looking at industry benchmarks, you can review your company's historical performance numbers and data. Examine the ROI metrics you've used in the past to see if they're still relevant. You can also examine spikes and dips in your online marketing performance to determine what worked and what didn't. Your business model will also assist you in determining which KPIs and ROI are appropriate for evaluating your marketing efforts. Here's a checklist of 6 tools to help prove your digital marketing ROI, month by month