There are different channels of marketing and this has made it easier to reach customers through different channels. However, when using several marketing channels at a go, it may be hard to tell, which one is rewarding your effort. In order to ascertain this, you need to calculate ROI on the various marketing strategies. This is the return on investment, which acts as the measure of the revenue as a particular initiative.

The formula for calculating the return on investment is as follows:

ROI = (Sales Growth – Marketing Cost) / Marketing Cost

Truth be told, the process of calculating the return on investment can be a daunting task in marketing. This is mainly because it can be difficult to pick out the specific aspects of the campaigns that generate sales.

In this post, we will look at different ways that you can adopt for ROI calculation.

1. ROI Based on Investment

Simply put, this will entail the calculation of what you have spent in a particular channel.  The cost of hiring marketing agencies, hours used by employees, administrative tools and any other amount that you have spent are some items that  you can include.

2. Calculation of Conversion Value

To deduce the ROI in your marketing strategy you can use the conversion value. It’s true that you may not be able to put exact values, but you can attach benefits and use them for calculating the ROI. You can calculate this in  different aspects when it comes to the conversion value :

  • Calculation from Geo-targeted offers

This refers to picking a specific product that will be offered to people in a particular geographical location. This is mainly designed in such a manner that the offers will entice the target market in that location. So, you should look at the channels that are generating more traffic. You should not group all of them together.

  • Calculation based on Conversions through Online Promotions

There are a number of costs that can go into an online promotion, including technical costs, creative costs as well as management costs. As such, in your ROI calculation, you should focus on the promotions that are effective and the ones that have the best results. The best way to measure which is the most effective method is by comparing two options at a go. This will help you pick out one that has the highest return on investment.

  • Conversions from Online Engines

If you have an option of selling directly from the site, you can measure the conversions from the online engine. You should do a comparative analysis between the site direct sales and those made through third parties. There are a number of factors that could motivate the consumers to make purchases directly from the site, like special discounts or the loyalty programs and you should calculate the ROI before making changes on your website.

3. Measuring Marketing Success

When you are able to factor in all these areas in a separate manner, then you can get a glimpse of the marketing techniques that are successful for your business. Also, It’s important to consider the profit margins and how the conversions relate to the objectives for each strategy. The calculation of your ROI may not give you accurate figures, but this would be a good indicator on the most rewarding marketing efforts.

If you want to get a more accurate measure, you should combine the ROI, with the other relevant marketing metrics. This gives you a perfect opportunity, where you will be able to measure your marketing properly and be able to identify the metrics that can give you a clear picture of the benefits and costs of the marketing strategies. The sole purpose of measuring the ROI, should be to help you known which marketing activities need to be improved so that they can align with the overall objective of the company. In conclusion, calculating ROI, shifts the focus of the marketing team from the marketing goals only and they are able to focus on the main goals of the organization.

 

p.s: Image source https://postregistrar.com/wp-content/uploads/2016/08/Pengertian-Analisis-Laporan-Keuangan-768×397.jpg

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