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What Is ROI In Marketing, What Is It For And How To Calculate It?

Investing in marketing can seem complex with so many options and tools available today.

More than that, as important as creating and executing actions is understanding how they are bringing return to your company.

Investments in digital marketing have brought an advantage over this type of analysis and measurement.

As the data is more complete, specific and detailed, it is easier to monitor how many people were impacted by the campaigns and what return each of the strategies actually had.

We have already brought here on the blog topics about other metrics such as Customer Acquisition Cost and Number of Qualified Leads .

In this article we have prepared content to talk about another important metric for the healthy development of your business and the success of your company's marketing: ROI.

What is ROI in marketing?

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ROI is the acronym for β€œReturn on Investment” β€” or, in Portuguese, Return on Investment.

This is one of the most important metrics for the company and deserves your attention and constant monitoring.

That's because ROI calculates how much money the company makes or loses from the investments made.

ROI is monitored mainly when we talk about marketing investments, related to the costs of strategies in this sector.

This allows you and your team to control the results of campaigns, actions and new marketing strategies implemented.

How to calculate the ROI of a marketing campaign?

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To calculate ROI you need to have some other data at hand.

First, you need to collect the total revenue during the chosen period.

Then you need to add up all the investments in marketing campaigns over the same period.

The ROI calculation formula is as follows:

ROI =
Total revenue – marketing investments
/ marketing investments

For example, let's say your company has run a biannual marketing campaign and wants to measure the marketing ROI for that period.

During the campaign, a total of 20 thousand reais was spent on marketing actions.

And your company's total revenue gain during the period was 100 thousand reais. Soon:

ROI =
100,000 - 20,000
/ 20,000
= 4

In the example we set up, the result on the investment was four times, that is, 400% compared to the initial investment.

What is ROI for and why is it important?

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With the calculation of ROI it is possible to identify which investments have the best returns or marketing campaigns that have been more successful.

It is also quite relevant at other strategic points:

Team self-esteem

Good performance rates are a fuel for teams to stay motivated and proud.

The success of the marketing team in bringing results to the company will reinforce the importance of the sector and make employees work in a more stimulating environment.

More profits

Paying attention to ROI means worrying about optimizing investments.

If the company's money is used in the right places, the result will be an increase in the profit margin, consequently.

Better goal setting

The analysis of data and history in the survey of investments made also facilitates the definition of assertive goals in line with the business proposal.

And, with clearer objectives, the investment and distribution of efforts also improve.

Less costs

Analyzing the return on investment also makes it possible to cut unnecessary expenses, makes us evaluate more carefully the actions with more investment and gives us more security in decision-making.

Lasting results

Tracking results according to return on investment also brings long-term transformations for companies.

An analytical view begins to be created in the teams, in addition to the work being developed with a focus on results.

What are the ROI limitations?

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ROI in marketing is an excellent metric for monitoring, but we must emphasize that there are some points of attention when using it to monitor the success of the actions developed.

The main one is that it is not so simple to define a good parameter of what is or is not a good rate of return.

But there are still others:

Does not consider inflation

ROI does not consider fluctuations in value due to inflation, whether it is up or down.

Let's say your company had a 10% ROI on marketing investment.

With current inflation, most of this value would be dissolved by inflation.

So your real return would not be 10%.

Does not consider seasonality

Another negative factor is that the ROI does not consider seasonality, which is a very determining factor for marketing and sales actions.

Especially in some specific market segments, such as car sales or holiday products, sales are socially and culturally driven.

Not considering these seasonalities can hide negative results in certain periods.

Does not take into account the duration of the investment
The ROI calculation does not change for quick campaigns, from one week, for example, to longer periods, such as the whole year.

Imagine that a company had a high investment only in the first month of the year and then drastically reduced this amount.

When calculating the annual ROI, the value will not take this variation into account, considering only the total data.

The calculation can be manipulated

It is necessary to ensure that everyone involved in the process is aligned with the details of the values ​​for the calculation of ROI in marketing.

This is because, as we are talking about the sum of many elements to arrive at the total values ​​of revenue and investment, a filling error or an ineffective alignment can generate a number that does not correspond to reality.

How to improve your ROI?

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To improve your ROI, you need to optimize your investments.

So, with the money allocated in the right strategies, your marketing cost brings more return and, consequently, increases your company's ROI rate.

Here are some tips for you to apply:

Have clear goals

Before you even go into practice, to improve your rates of return on investment, it's worth taking a step back and spending a lot of time on planning.

Analyzing the data and history of investments made so far also makes it easier to define what goals you want to achieve.

With clearer objectives, you will know how to distribute investments and monitor, throughout the campaign, if the goals are being met.

Also, if things don't go as planned, you can always review the strategies and change them.

Another advantage made possible by digital marketing!

Also use CRO

CRO stands for Conversion Rate Optimization.

By applying actions for this type of optimization, you increase your conversion rates and, thus, improve your investments.

If your conversion rates are too low, it means you're spending to drive people to your website, blog, or landing pages, but they're not taking any action from there.

This is synonymous with negative investment.

Conversational marketing

One of the most current ways to improve conversion rates is to use Conversational Marketing tools .

Through chatbots and virtual assistants, you impact the visitors of your pages in a personalized, dynamic way and increase your conversion rates by up to three times.

In addition, it is also a way to generate better qualified leads.

This is the kind of solution we offer here at Leadster and you can access our solution demo here .

Understand each stage of the prospect

We talked about qualified leads in the previous topic.

But what does it mean?

Offering your product or service right away in an ad or campaign is not always the best option to sell.

That's because consumers are bombarded with information and offers every day, all the time.

And not all of them are ready for this decision phase.

It's what we call in marketing and sales the "Buying Journey".

Between a first contact and the acquisition of the solution that your company offers, the consumer needs to gain trust, build relationships and mature the need to buy.

From a business perspective, this means qualifying leads.

That is, transform contacts into consumers who are increasingly interested in what you have to offer, until they become your customers.

So, to improve your return on marketing investments, understand the different stages of the journey.

In this way, you will also know better how to distribute the shares and how to work with the consumer at each stage of purchase maturity.

Segment each campaign

One of the ways to impact consumers at different stages of the Shopping Journey, with the right type of communication and offer, is to invest in segmentation of marketing campaigns.

Today, paid media tools, such as Google Ads and Facebook Ads, offer many possibilities for targeting and reaching very specific audiences.

Align the campaign to your objective

Think about the objectives designed at the beginning of the planning and understand what type of ad will be most relevant to each stage of the shopping journey.

Do you want to attract new people?

Do you want to impact people who have already had contact with your brand?

Do you want to work with offers for those who have already shopped with you once?

The ads and distribution of investments within the campaign need to be aligned with the objective outlined for it.

Make detailed guidance

Today it is possible to segment campaigns based on consumption and behavior data of each user.

Therefore, use this information provided by the ad platforms.

You can segment your campaigns according to interest, consumption habits, demographics, age group, occupation…

There are several options to explore and test.

Use email list

Did you know that you can use your contact list to create targeted ads?

Let's say you want to impact contacts who have already made a quote with you, but haven't closed it yet.

Tools like Facebook Ads allow you to upload your email lists and impact who uses those emails on social media.

The opposite is also possible.

If you only want to reach new contacts, you can upload lists and exclude those leads from the campaign targeting.

Use retargeting

Retargeting and remarketing are also great ways to segment your campaigns.

With this type of strategy, you can only impact people who have already visited your website, blog, Landing Pages…

And you can even choose specific pages for each ad that will be served.

The chances of attracting the attention of people who have already had contact with your brand are much higher.

Do lead nurturing

Another way to work each stage of the Shopping Journey is to use lead nurturing.

Lead nurturing is essential to guide the consumer through the entire shopping journey design, maintaining and increasing that person's interest in your brand and the solution you offer for them.

It is also a way to offer content and offers according to each stage of purchase maturity.

Here, it is worth making use of automation tools, which facilitate the execution of these actions and interactions.

Invest gradually until you validate

As we mentioned at the beginning of the tips to improve your marketing ROI, you have the option to adjust the campaign while it is still in progress.

Digital marketing tools have this advantage over some offline marketing investments.

In addition to changing investment values, you can also run tests, track performance and invest more incisively in campaigns and channels that are bringing the most return.

Make your decisions based on data.

Report the ROI of each campaign

In order not to depend on information within each investment platform and channel, centralize all data in a specific and more detailed report for each campaign.

In addition to making it easier to follow up for decision making while campaigns are running, you will also have, in the long term, a complete history of your company's marketing actions.

How to prepare a report with ROI?

For this full report, start by defining whether you will be tracking metrics other than ROI in marketing, such as Customer Acquisition Cost .

Also, identify the campaign, follow-up period, objectives, spend, and results.

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Define the audience

Here we are not referring to the audience of the campaign, but to whom this report will be presented.

Different data matters to marketing analysts and the CEO of a company, for example.

Therefore, understand who will access the report and choose the metrics that will be monitored from this point of view.

Set the metrics
An efficient report doesn't have to be super long and full of data.

Focus on what is relevant to the strategy.

And, starting from the analysis of who will access this report, define the metrics according to what is of interest to the public.

Choose frequency

Also define how often to fill the report.

This needs to be very well aligned, especially if the report is updated by more than one professional on your team.

In addition, also define the frequency that this report will be reported to the highest positions, such as management and board.

Learn how and where to extract metrics

Use the right tools to extract all the data according to the channels and investments made.

The best professionals to fill in each metric are those who follow the course of the campaign on a daily basis, but it is interesting that you align with them a guide so that everyone can have access to the data and know how to extract it.

Create a template

The next step is to choose how this report will be presented.

Here, the most important thing is that it is an easy to interpret, visual and agile form.

And, of course, simple to update too.

Your marketing team should spend most of your time and effort on analyzing and strategizing the data, not filling out a report.

Do analysis

It may be that not all data immediately deliver the most important information for the business.

Therefore, the data analysis part is fundamental in the reports.

Some ways to present these analyzes are:

  • Action and reaction: what were the results obtained directly through the actions taken and the results that were no longer obtained by actions that were not developed (in case of cuts, for example);
  • Correlation: what were the experiences and results of each channel and the unfolding of the campaign;
  • Benchmarking: how metrics relate to the market.

Conclusion

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Ready to profit more and make good decisions with ROI tracking in marketing?

This metric has a profound impact on the success of your company's campaigns and the ability to build analytical insight into them.

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