What is return on investment (ROI)?
ROI stands for Return on Investment and is the calculation of how much money you get back from your investment. For example, it can be used to calculate how much a company earns from running digital ads. In that case, you look at how much has been spent on advertising and how much revenue has been generated as a result of the ads.
What is the formula for ROI?
The formula for calculating ROI is as follows:
ROI = (Profit from the investment - Cost of the investment) / cost of the investment
Why is ROI calculation important when it comes to marketing?
The ROI calculation gives you valuable insight into how well your marketing activities perform compared to each other. This is especially useful when you are running advertising across different channels, as it shows you how much budget you should allocate to each channel to achieve maximum return. The ROI calculation is also a tool that makes it easy to provide customers with insight when a large number of campaigns are running simultaneously.
