Return on investment (ROI)
Return on investment stands for the relationship between investment and profit. This value is used to show the extent to which an investment has paid off. The financial success of a campaign can thus be determined, especially in online marketing.
What is the function of the ROI?
On the one hand, ROI can be used to determine whether a campaign has been financially worthwhile. It can also be used to identify areas that were particularly cost-intensive during the campaign. With this knowledge, future campaigns can be adapted very well.
One example of an advertising measure where the value can be precisely determined is AdWords. The focus here is on click costs (CPC). For SEO measures, however, the ROI is somewhat more difficult. The sales cannot be clearly attributed to a specific SEO measure. The success of the measures can only be determined after a longer period of time. The problem that arises here is that time also incurs costs that are not taken into account.
It is possible to calculate the financial success of an entire online marketing campaign using ROI. This is because there is usually a fixed budget that is set for such campaigns. The exact turnover is the path of the customer that can be traced back to the actions of the campaign up to the conversation.
In order to determine a realistic return on investment, the following conditions must be met:
- All marketing channels used for the campaign are included in the budget.
- The customer journey – the customer’s path – must be tracked.
- It must be clear exactly what a conversion means in the campaign.
Online marketing
In online marketing, the return on investment stands for the relationship between the profit achieved and the advertising costs incurred. The financial success of advertising campaigns is therefore measured. To carry out such a measurement, the necessary data must be tracked. The following formula is used to calculate the return on investment:
Profit/sales x sales/total capital x 100%
This calculation is also referred to as ROMI in online marketing. This stands for Return on Marketing Investment. The term ROAS is used for special search engine marketing. This stands for Return on Advertising Spendings. Visitor behavior is tracked with the help of web tracking. This calculation is simplified:
Turnover – total costs / advertising costs
The total costs include all activities/investments incurred for the product. Such costs include marketing costs, purchasing costs and production costs.