Digital Marketing Dictionary

What is ROI (Return on Investment)?

The return on investment is a basic parameter, metric and figure in the world of advertising, marketing and business. The Return On Investment reflects what we are earning on each of the actions we take in our company.

It is used to compare the profit obtained in relation to the investment made, and thus analyze the company’s performance.

Formula for calculating ROI

ROI = (Profit – Investment) / Investment

The final result is expressed as a percentage and therefore the final result is multiplied by 100.

Why measure your business ROI?

Broadly speaking, it allows you to measure whether what you invest in your company pays off and you are not losing money.

  • You check that your email marketing campaigns are working
  • It makes it possible to change campaign if we are not earning money
  • When you monitor ROI, you know what works and which channels were most effective in your strategy.
  • Allows to measure email marketing results
  • We thus know where we invest
  • We have the information to evaluate our campaigns

If the ROI value is positive, we already know that our project or business is profitable, and if it is negative, the investment is not profitable and, therefore, we lose money.

Example of ROI analysis

We have a business selling online marketing courses. We invested 500 euros in new material and the realization of the course and at the end we have a profit of 1,500 euros. The ROI is 200%, so for every euro invested in the training course, we get a return on investment or profit of 2 euros.

The result is very important because, as we have said, if the profit is positive the project is going well, but if it is negative then we see that it is not profitable, we lose money, and we must change our strategy.

How can we improve our return on investment?

Buyer persona

Define the buyer person or potential customer who is interested in our services or products, go looking for him and find out what he needs in order to be able to offer it.

Website Positioning

For our ROI to work, we must attract organic traffic to our website so we can sell. For this we will work on SEO; keywords, with keyword research functions and specific content for it.

Working with content

They are essential to establish good campaigns, reach the buyer persona and sell, which is ultimately what we are interested in with our campaigns and ROI metrics.

Building customer loyalty

When a customer buys, we cannot lose him (it has already cost us a lot to get him interested and to buy our services), so we have to keep him loyal. How can we do this? With new campaigns, with respect, with discounts, gifts and special promotions.

All these parameters are essential to improve our ROI.  But if we measure and know the results, but do not change them, there is little point in analyzing them. Changing and re-measuring is a frequent trend in marketing to find out if we are doing it correctly and if we are getting good results.