ROI and Few Essential Aspects to Pay Heed to
If you are trying to figure out what is a good return on investment, a double-digit figure is a remarkable achievement to start off with. However, if the ROI is more than you had expected, aim at “amplifying” the positive effects.
Why is ROI crucial for any business?
Using the ROI equation is crucial for any business and why is it so? We know that there is cut-throat competition in the market. Only those business entities survive the ones that closely monitor the ROI and also use the marketing ROI calculator frequently.
In the event, you find that if you are spending on certain marketing strategies that are not paying off as you expect them to, do not spend time on it any further. Instead, invest in and hope for ROI only if you are rewarded in an optimum manner.
In other words, return on investment will help you to identify whether or not your marketing efforts are moving in the right direction or otherwise.
Before we proceed further, let us quickly find out the Return of investment formula below. How will you calculate the Return on Investment of a marketing campaign that you decide upon?
One of the most basic ways to proceed with the calculation is to calculate the return on investment for a marketing campaign is to “integrate it into the overall business line calculation”.
So, the marketing ROI formula will be-
(Sales Growth-Marketing Cost)/Marketing Cost=ROI
Alternatively, you can write for the formula as-
ROI-[(Financial value-Project cost)/Project cost]x100
Limitations of ROI
An ROI will provide information specifically. It means that will not reflect every financial information pertaining to the company. The information it offers is limited. It denotes the financial success of a campaign that you undertake.
In order to get an accurate projection of ROI, you must also be aware of the future expenses related to your business. This may not be possible to assess always because on the way there might be several unexpected expenses that can take you by surprise.
The return on investment does not reflect the company’s cash flow.
Challenges of ROI
Benefits of ROI
In a nutshell, the benefits can be summarized as follows.
With the help of ROI, as an owner of a business, you can keep a track of and also analyze short as well as long-term projects and assignments. Most importantly, you are able to know how your company is performing financially, which is undoubtedly vital for you to decide upon the next step that must take. As such, using the marketing ROI formula yields remarkable results that you must follow from time to time to assess your company’s financial health.