Return on investment (ROI) is a measure of the profit earned from each investment. Like the “return” you earn on your portfolio or bank account, it’s calculated as a percentage. In simple terms, the calculation is:
(Profit – Investment)
Investment
Marketing campaigns are investments. And like any smart investment, they should be measured, monitored and compared to other investments to ensure your clients are spending their money wisely.
Return on Investment Value
ROI calculations for marketing campaigns can be complex -- you may have many variables on both the profit side and the investment (cost) side. But understanding the formula is essential to produce the best possible results with your client’s marketing investments.
With solid ROI calculations, you can focus on campaigns that deliver the greatest return. For example, if one campaign generates a 15% ROI and the other 50%, where will you invest your marketing budget next time? And if your client’s entire marketing budget only returns 6% and the stock market returns 12%, the company can earn more profit by investing in the stock market.
ROI also helps your client improve their ongoing campaigns. They can tweak campaign variables to compare ROI and focus on the version with the best performance.
With the Consulting M.O., you can calculate ROI for your client’s existing campaigns, and project ROI for all future campaigns. This helps them justify marketing investments and prevents them from slashing profitable marketing budgets in tough times. By focusing on ROI, you can help your client move away from the idea that marketing is a fluffy expense, into the idea that marketing is the engine that drives revenue generation.
Return on Investment Services with the Consulting M.O.
Determine How to Use ROI. Evaluate your client’s existing measurement and determine how much effort to devote to ROI.
Confirm Formulas with Finance. Review other relevant formulas with finance including cost of goods (COGs) and gross profit.
Establish an ROI Threshold. Determine the minimum ROI goal to meet for all of your client’s campaigns.
Calculate Total Marketing Investment. Determine the entire cost for a specific campaign.
Calculate and Track ROI. Use inputs to project ROI for future campaigns, and track ROI against projections for existing campaigns. Use as a guideline to determine whether your client should launch specific campaigns.
Evaluate Alternate Calculations. Explore alternate measurement for different scenarios.
Your client might need return on investment services if:
They view marketing as an expense instead of an investment
They’re not projecting and tracking ROI currently
They cut the marketing budget when times get tough
They can’t determine which of their marketing campaigns generate a positive return and which generate a negative return
They use anecdotal evidence when deciding on different marketing campaigns
