Return on Investment: What it is, how to calculate it and improve ROI

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Return on investment or ROI is one of the most important metrics in digital marketing. Especially because it will help you define whether the strategies you have in place are achieving good results for your business.

Now, you may have noticed that this metric is often referred to as ROI, because it is an acronym for the term “return on investment.”

But beyond what it means, you have to learn how it is calculated. Since it is one of the most complicated and elusive aspects of marketing.

So, do you want to delve deeper into what Return on Investment is ? How is it calculated? What is it used for? The answers to these questions and many more can be found in this article.

ROI is a widely used metric in marketing to prove the canada phone number lead financial results of an action. Having such results will help measure the effectiveness of the strategies carried out.

In other words , ROI aims to calculate the percentage of profit expected from an investment compared to the initial bet.

To calculate the Return on Investment, it is necessary to account for the total income (sales achieved), subtract the total costs (investment) from these and, finally, divide this result by the total costs. Therefore, the mathematical formula to obtain the ROI is:

[(Income – Investment) / Investment] * 100 = ROI

It should be noted that temporality does not intervene in the calculation of ROI , therefore, it is important to establish a defined period in which the analysis will be carried out.

If you want to analyse the investment made in a month or a year, you should only account for the income and costs of that period. This is important to avoid errors.

Examples of how to calculate ROI

In our practice we are analyzing the Return on Investment on a marketing strategy, but this same index could be used to analyze any type of investment.

For example, it could be used to analyze an investment in technology for the company and whether it helps automate a process and what results were achieved.

This is because it understands the value we generate through digital marketing campaigns and indicates the investment that has cost us a sale.

Whether our online marketing strategy includes actions on Google Ads , Facebook , Twitter, Linkedin or Instagram, it is necessary to know the ROI of the different campaigns to find out which of them is most efficient.

Measuring it is not always easy, but it is a fundamental piece of information that companies must have if they want to know first-hand the real profitability of any type of investment we have made.