What is Marketing ROI and Why Is It Important?
There is a simple answer: investments need to be justified. Therefore, for each strategy you choose, it is essential to know how much it brings in return.
A satisfying cost-benefit is what every company seeks when investing in something.
In marketing strategies, that should frequently happen, mainly because there are many strategies to put your money into. The great challenge is to know which of them can bring a bigger return.
Tracking the ROI of a campaign can help companies to define which strategies work better according to their budget, audience, among other factors. Each scenario will influence the strategy you’ve chosen.
Measuring ROI is essential to keep investing strategically, ensuring better budget management, and results aligned with the company’s aims.
In this post, we will talk more about marketing ROI and the importance of this metric. The content will cover the following topics:
- What is marketing ROI?
- How to calculate marketing ROI?
- Why is marketing ROI so important?
- What are the benefits of measuring it?
Keep on reading and learn about the subject!
What is marketing ROI?
ROI stands for Return Over Investment. This metric calculates how much a company can profit for each dollar invested in a specific marketing strategy.
It is possible to develop several campaigns, including email marketing, Content Marketing, and search engine marketing actions. Each one requires an investment that can generate a profit, which depends on several factors.
By measuring the strategy’s ROI, you can find out whether the chosen path is providing a good profit margin or not.
How to calculate marketing ROI?
The ROI calculation may vary in some companies, especially if they decide to include additional factors to find out the return that the investment brought.
However, the main formula that will always work is:
If you’re looking for a faster result, you can use our Marketing ROI Calculator:
It is also possible to make a more accurate calculation. It is useful to know the organic sales volume and how much of sales originated from marketing actions.
Therefore, a more precise calculation you could do is:
(sales – organic sales – marketing cost) ÷ marketing cost = marketing ROI
Why is marketing ROI so important?
Now, we will talk about why ROI is important in marketing. Below, check out some topics that will help you understand the impact of this metric.
Identify the most effective strategies
Let’s suppose your marketing team has invested, for example, in email marketing, sponsored links, and remarketing campaigns. Each one of them generated the following results:
- in email marketing, you invested US$150 and obtained US$2,000 in sales;
- in sponsored links, you invested US$80 and obtained US$3,500 in sales;
- in remarketing, the investment was US$200, generating a return of US$1,800.
With these numbers, it is possible to calculate the ROI of each strategy.
You can also see that one of them required the smallest investment and returned the highest profit — sponsored links performed better.
Thus, it is easy to know which are the most effective strategies to invest in.
Understand your audience’s behavior
Another reason why ROI is important in marketing is that it allows you to understand your audience’s behavior.
Besides considering the numbers coming from investments, this metric clarifies which type of strategy has the best impact on the audience.
ROI results allow you to find out what type of advertising your audience is most likely to interact with and, thereby, convert.
What are the benefits of measuring it?
A correct and continuous ROI measurement allows your company to achieve incredible benefits. More solid strategies and better budget allocation are the main ones.
Understand these advantages better below!
Invest the marketing budget better
Marketing budgets are often low. Therefore, it is essential to know how to use this money, doing this in the best way possible.
If a marketing team measures the ROI of its campaigns, it can understand which actions require less investment to bring a good return.
This knowledge can generate great budget management and, thereby, better results. After all, the decisions will lead to strategies that perform better.
Make more strategic decisions
No matter how many effective marketing strategies exist, it is impossible to invest in all of them at once.
The ROI gives you the possibility to know, from exact numbers, which ones should receive the highest budget percentage.
Strategic decision making, based on data, is increasingly necessary in the corporate world. Therefore, you should consider the ROI to decide how to conduct a marketing campaign.
Thus, the marketing team can pick the most appropriate strategies among all the options, investing the budget properly.
Achieve your goals
Marketing objectives will always make marketers think about the best strategy to reach them.
This work can become a lot easier if there is ROI tracking. Besides showing which strategy has the best cost-benefit, the metric indicates which one generates higher results.
It is possible to create campaigns using precise data, which will certainly lead to the results your company desires.
Tracking metrics with the help of good tools is essential to have increasingly accurate reports and make the best decisions.