One of the most important parts of a marketing campaign is to assess its performance, impact, and profits to determine if your marketing efforts are actually helping your business improve results and revenue. The knowledge gained during this assessment process can be used to develop future data-driven strategies, which enable low-risk decision-making.

How do you know if your marketing campaigns are performing well? It is the ROI (Return on investment), or return on investment (RSI) which will indicate it to you.

What is return on investment / ROI?

Return on investment, in marketing, is the practice of attributing potential – and desirable – growth in earnings, profit, and revenue to the impact of your marketing initiatives. By calculating the ROI of your marketing campaigns, your business can measure how much of its marketing efforts, either overall or for each campaign, are contributing to Algeria WhatsApp Number List revenue growth. Typically, ROI is used to justify marketing spend and budget allocation for current and future campaigns.

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How to use ROI for your business?
Calculating ROI is an essential financial metric that helps measure your performance and can help guide your business decisions and optimize your marketing efforts. Analyzing and understanding the ROI generated by a campaign will allow your marketing team to do the following:

Justify marketing expenses
Marketing managers consistently mention allocating resources and budget for marketing efforts as a top priority. However, in order to secure the budget and resources for future campaigns, it is essential that current expenses and marketing budget are justified at the executive level. To do this, marketing teams must accurately calculate the ROI of their marketing projects. For example, they need to know if their advertising campaigns are driving conversions and the correct ROI in order to continue receiving funds.

Distribute marketing expenses well

On online and offline channels, there are a huge number of possible marketing combinations. However, any combination to start a campaign requires funding. That’s why understanding what types of online and offline marketing efforts generate the most revenue is crucial to properly allocating a business’s marketing budget.

Measure the success of your campaigns and establish benchmarks
The ability to measure the success of a campaign and establish a foundation that can serve as a benchmark for future efforts are essential for any business. With that in mind, accurately measuring ROI will help your marketing team do both. By understanding the impact of individual campaigns on overall revenue growth, your employees are better able to identify the right mix of offline and online campaign efforts. Plus, measuring ROI consistently allows them to set benchmarks to quickly assess their success and adjust their future efforts.

Competitive analysis
Tracking the marketing ROI of competitors should allow your marketing team to accurately analyze their performance within your specific industry. For example, it is possible to track publicly available financial data of some of your competitors and estimate their return on investment. Then you can adjust your marketing strategy to these estimates to try to stay competitive.

How to calculate the return on marketing investment?

Although there are several ways to calculate the ROI of your marketing campaigns or your monthly or annual marketing action, the basic formula used to understand the impact of your marketing campaigns is relatively simple.

The following formula calculates the return on investment, expressed as a percentage:

Return on investment (%) = [(gain / benefits of the investment – cost of the investment) / cost of the investment] x 100

To illustrate this calculation, let’s take the simple example of a Google Ads campaign over a given period:

Your company has launched a Google Ads advertising campaign with a budget of 1000 euros per month. After one month, the net income associated with your Google Ads campaign is $ 3,000.

To calculate the ROI of this campaign, he has the following calculation done: [(3000 € – 1000 €) / 1000] x 100 = 200%

This means that for $ 1 invested in your Google Ads campaign, you generate $ 2 in net profit.

If the result is greater than 1, you have made a profit and therefore your campaign is successful because it made more than it cost you.

If the result is equal to or close to 1, you haven’t gained or lost much.

On the other hand, when the result is less than 1, your campaign lost money and it was therefore not profitable.

Let us now take the example of an annual inbound marketing campaign:

Here is the formula to apply, identical to the classic ROI formula: ROI Inbound Marketing = [(generated turnover – Cost of your Inbound Marketing strategy) / Cost of your Inbound Marketing strategy] x 100

Imagine that the annual cost of your inbound marketing campaign is € 20,000 and your annual turnover is € 50,000, your ROI will be 150% (30,000 / 20,000 = 1.5 x 100)

This means that for 1 € invested, you will generate a return on investment of 1.5 €.

In the case of inbound marketing, you have to understand that it is impossible to achieve a positive ROI in the space of a few months. Depending on your sector of activity and your positioning, it will sometimes be necessary to wait almost a year before you can see the profitability of your investment.

To measure the profitability of your digital marketing actions, you may also want to know more specific performance indicators, such as the cost of acquiring a lead or cost per lead (CPL), the Customer Lifetime Value (CLV) ) or customer lifetime value, or the lead conversion rate.

Here is how to calculate these indicators:

Cost per lead = Total marketing spend / Total leads collected
Customer Life Value = 1 / (1 – retention rate)
Lead conversion rate = (Number of conversions / Number of visitors) x 100
What is a good marketing return on investment?
A 5: 1 ratio is generally viewed as a marketing ROI with a good return on investment, while an exceptional ROI revolves around a 10: 1 ratio.

Anything less than a 2: 1 ratio is not considered profitable and equates to loss.

However, it is still possible to generate earnings with low ratios, when your costs and overall charges are less than 50% of the selling price of your product or service. As all businesses are different, it is important to take into account the overall costs and specifics of each industry.

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