The ROI stands for Return on Investment. It is basically the measurement of the profit which is earned from the various investments made. This way the efficiency of the investment can be found out. One can also use the value of the ROI to compare among a number of different investments on the basis of their efficiency. With the help of the marketing ROI, the amount of the return that is received on a particular investment can be measured directly with respect to the cost of the investment. Now there is one thing to be noted that, since the value of the ROI is measured in terms of the percentages, one can use to compare with the returns that are obtained on other investments. This way it became quite handy to measure different type of investment.
How to calculate the ROI?
To calculate the value of the ROI, the benefit that is received from the investment is divided by the total cost of the investment. And then the final result is expressed in term of either ratio or percentage.
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The formula for the Return on investment is given as-
ROI= (Current value of the investment – cost of the investment) / cost of investment
Here in the above formula, the ‘Current value of investment’ is a term used to refer to those proceeds which are obtained from the sale of the investment on interest.
Understanding the concept of the ROI
Since the ROI is a popular and versatile method, it is quite a popular method to compare the returns of investments of different varieties. It can be sued as great tool for measuring the profitability of any investment. ROI has wide range of applications like the ROI for an investment in stock, in terms of expanding a company, or in the field real estate transactions. Normally the ROI, whose net value is positive, is considered to be worthwhile. And when the ROI have higher value, the companies can use them to eliminate or selected the best options out there. Also one should avoid the negative ROI; they may result into losses.
What are the various measurements that should be taken while calculating the ROI?
The various measures that should be taken while calculating the ROI are as follow-
- Since there are so many financial formulas required for the calculation of the ROI, one needs to confirm their financial formulator before starting the calculations.
- Then one needs to set up a threshold for the ROI for the total budget and other marketing campaigns.
- Once the goal is set, then formulate a budget and then stick to it.
- Finally calculate the ROI and then use these ROI campaigns to improve your marketing campaigns.
Thus the marketing ROI is a good thing to be measures for all the marketing investments. With the help of the ROI calculations, one can make modifications in one’s sales process be it long or complex.