How is ROI Used in Business?
The results of the ROI calculation can be used as a reference to assess whether the promotional program or activity carried out has been effective or not. ROI will also be a reference for potential investors who will invest funds in your company. If the company's ROI value is good, then investors are more likely to be interested in making investments.
In the world of digital marketing itself, you need to understand that the results will be seen in the long term. When you just launch a marketing campaign, you may not see a good ROI right away. It is even possible that your ROI will be negative at first.
But over time, the ROI on your digital marketing activities should improve and increase in value. Digital marketing campaigns usually produce significant results over time.
So don't panic if you find a low ROI number at the beginning of implementing a marketing campaign. However, if the number does not increase until the following months, you may need to re-evaluate and make improvements so that profits increase.
Factors Affecting ROI (Return On Investment)
Annual Return On Investment can help you analyze and compare the performance of innervation over a period of time. Here are some factors that can affect ROI, including:
Turnover of operating assets or the rate of turnover of assets used for operational activities, namely the opportunity for operating assets to rotate within a certain period.
Profit margin is the amount of profit of an operation expressed email list in the form of a percentage and the amount of net sales. You can use this profit margin to measure the level of the company and relate it to sales.
By knowing these factors, the company will gain two benefits. The first is to provide information about how much profit the company has earned. The second is to be able to know the effective amount of assets in a company.
How to Calculate ROI
Another important thing for you to know in discussing ROI is how to calculate it. The calculation of ROI is actually quite simple, namely you only need to compare the profits obtained with the investment issued.
ROI = (Profit / Return : Investment Amount) x 100%
For example, there is an investment of Rp 20,000,000 that can generate sales of approximately Rp 25,000,000. This means that the profit you will get is Rp 5,000,000. So the calculation of ROI in percentage according to the formula is.
Return on Investment = (Rp 25,000,000 - Rp 20,000,000) :Rp 20,000,000 x 100% = 50%. From this calculation, it can be concluded that the ROI level is approximately 50%.
To find out how much profit you have, you need to subtract the income from the investment costs incurred. If in general business, this concept of profit may be easy to measure. But what about in the world of digital marketing?
As you know, the results obtained from implementing digital marketing strategies are not always in the form of sales figures. But there are also things outside of sales that are part of the company's income or revenue.
Some of these include consumer metrics from various media platforms, the level of audience engagement with the brand, and how many leads are generated. For that, you need to include everything that is included in the revenue or income.
Likewise with the investment costs that you spend on the marketing campaign. Not only the amount of investment made by investors in the company, but also other costs that occur during the campaign process. For example, advertising costs, equipment used, and consultation with professional digital agencies.
What is the Ideal ROI in Digital Marketing?
Basically, the ideal ROI is one that has a positive value and shows that the marketing strategy is effective. While a negative ROI can be a sign that the strategy is not running properly and needs to be fixed.
Advantages and Disadvantages of ROI for Digital Marketing
Like other calculations or metrics in general, ROI also has its own advantages and disadvantages when applied in digital marketing. What are the advantages and disadvantages of ROI? Check out the complete details below.
