What is ROI and how does it help us in our online marketing strategy?

Measuring the results of the marketing actions of the company is key to seek the greatest effectiveness of our advertising actions, with the lowest cost. On the Internet, there are tools that allow us to measure the impact of any advertising action and we can find out the profitability of a marketing action thanks to the ROI. It is a fundamental element for companies with presence in the network and from our business school today we tell you how you can help us in our Online Marketing strategy.

The initials ROI correspond to the Anglo-Saxon expression “Return On Investment”, return on investment in its translation from English. The ROI allows us to evaluate the profitability of an investment and compare different projects or actions, depending on their economic performance. The ROI is an indicator that has its simplicity among its advantages, and that is why it has become popular in the evaluation of Online Marketing actions.

How is the ROI of a Marketing action calculated?
The ROI shows the relationship between the investment we make in a Marketing action and the benefits it generates. To calculate the ROI, the amount invested in the advertising action must be subtracted from the income generated, divided by the investment, and the result multiplied by 100.

ROI = [(income – investment) / investment] x 100

If the ROI is positive it means that the project is profitable. In the event that the result of this formula were negative, the investment would not be profitable and we would be losing money.

This simple operation can be fundamental to make the decision to invest in some actions or in others, comparing the ROI of each of them. There will always be a first test of each of the actions, but calculating the ROI we will obtain the necessary information to know which actions or projects are more profitable and, therefore, decide on new measures in the future.

How do we apply ROI to Online Marketing?
In a strategy of Online Marketing, the ROI allows to evaluate economically if an advertising campaign in a certain channel had or not the expected success. When calculating the ROI, it is necessary to analyze the sales generated by each traffic source, in the same time interval.

There are several tools like Google Adwords and Analytics that allow us to segment the origin of those sales or conversions, and extract the necessary information to calculate the ROI of any Online Marketing action.

In this way, companies can make better decisions and optimize their budget in these types of campaigns. In fact, there are Online Marketing departments that work with the objective of achieving a minimum ROI. In these cases, after finding out what initiatives provide this ROI, the strategy of the company involves investing in those campaigns that bring a minimum return established.