ROI is the acronym for Return on Investment. It is a measurement and evaluation indicator between marketing investment and the benefits it has generated.
Through a simple equation, ROI assesses how much sales have been generated by the budget invested in a campaign.
What is the purpose of ROI?
It is a common KPI to evaluate the success of a specific marketing action and make future decisions accordingly to its result.
However, it doesn't always have to be purely an economic metric. A social return on investment (SROI) and other non-financial returns can also be measured.
How to measure ROI?
The simplest and most common formula to measure ROI is
[(Generated Revenue - Investment Made) / Investment Made] x 100
The result is expressed as a percentage.
Why is ROI important?
ROI is a measurement percentage that indicates the direct benefit generated by a marketing campaign. This metric is important when analyzing if an action has been beneficial for the intended interests and setting the strategy to follow in the future.
It is a very popular metric due to its simplicity and versatility. ROI can be easily used to get an idea of the value obtained from an investment.
It is easy to calculate and interpret. If it doesn't yield a positive result or there are other available options with a higher ROI, it can be seen as a sign that can help investors eliminate negative options and select better paths.