ROI or Return On Investment is a performance calculator that evaluates the efficiency or profitability of an investment. ROI is one of the most important factors of a marketing campaign. Through this measure, companies or marketers can judge the performance and can decide whether the marketing efforts are dragging profit to the organization or not. Today, CloudVandana is exploring the concept of ROI in marketing.
Marketing ROI is the practice of assigning profit and revenue growth to marketing efforts. In a single work, marketing ROI is used to justify the marketing budget allocation for present and future campaigns.
How Companies Are Using Marketing ROI
At the beginning of a campaign, calculating the return on marketing investment can help the companies to take proper business decisions and optimize marketing efforts. Understanding the ROI generated by a marketing campaign helps marketers in many ways.
Justify Marketing Spend
In order to secure a budget and resources for future campaigns, the present budget status should be justified at a high level. So marketers should efficiently calculate the ROI for enhancement of the marketing strategy as well as organization. For example, if native advertisements are driving more sales and ROI, rather than display ads, budgets can be properly allocated.
Distribution Of Marketing Budget
Marketing campaign combines both online and offline marketing. Any combination of campaigns requires funding. So understanding the proper source of conversion is very important for the proper distribution of the marketing budget.
Measuring Campaign Success
Another important part of a marketing campaign is to measure the campaign’s success and establishing the strategies that can work as a reference in future efforts. By understanding the impact of individual campaigns on overall revenue growth, marketers can decide the right mix of offline and online campaign efforts. Measuring ROI consistently allows marketers to establish the proper strategy to quickly reach the success line.
Keeping an eye on the marketing ROI of competitors helps marketers to understand the performance of the competitors. Through the tracking of publicly available data, marketers can estimate the ROI of competitors.
Rule Of Perfect Marketing ROI
The proper rule of calculating marketing ROI is 5:1 ratio, an exceptional ROI is being considered at around 10:1 ratio. Any ratio below 2:1 is considered not profitable, as the costs to produce and distribute the services often break with the spending and returns.
Costs and overhead lower than 50 percent of the sales price can be considered as profits on their efforts even on lower ratios. As every organization is different, it is important to consider the different overhead costs for different companies, margins, and industry factors to calculate the ROI.
Tips To Improve Marketing ROI
1. Establishing Proper Goals
It is very important to set a clear goal that indicates the external factors and consider leveraging measurements like brand awareness strategies, social platform engagements, or a ratio between MQLs and SQLs.
2. Cost Controlling
3. Marketing Analytics Platform
Utilizing the proper attribution models and marketing measurement strategies works the best to track consumers across the omnichannel landscape, leading to clearer, holistic and granular results. Focussing on a marketing analytics platform to unite the separate attributions beside online and offline measurements, leading to more effective and proper ROI measurement.