Social media is one of the most powerful marketing tools available for promoting your business. If your target group is millennials, social media can be utilized effectively to increase the reach. Content marketing has taken over the internet by storm. Be it a small scale business or a multinational firm, engaging online users has become crucial for achieving growth and generating sales. The effectiveness of online content marketing is measured in various metrics. These metrics can give a deeper insight into the impact of the time, effort, and money that has been invested in the bottom line of the company. Digital marketing ROI is used to measure the impact of the strategies and tools used in a digital marketing campaign. ROI stands for Return of Investment.
ROI in Marketing
We will help you to get to know more about marketing ROI. The degree of which marketing campaigns are contributing to the revenue growth of a company can be measured using ROI. Businesses use marketing return of investment to determine decisions about marketing campaigns. Return of investment also helps companies to optimize their marketing campaigns.
Allocation of resources and building a budget for marketing efforts are among the top priorities of any business organization. However, Return of investment should be precisely calculated and analyzed to implement this step.
Combinations of ROI in Marketing
There are multiple combinations of marketing mixes that are available for choosing. However, funding is an inevitable factor for any of these combinations. Return of investment is to be analyzed for an optimal distribution of capital among online and offline marketing campaigns.
The establishment of baselines can be used as a reference for marketing efforts in the future. Also, the return of investment is analyzed for establishing these baselines. Return of investment is also used for measuring the overall success of a campaign. Marketing return of investment of competitors is often analyzed by rival companies to gain a precise understanding of their performance within an industry.
Calculation Methods for Return of Investment
- Marketing ROI=(sales growth-marketing cost)/marketing cost
- Marketing ROI=(sales growth-organic sales growth-marketing cost)/marketing cost
Yet another method used for the calculation of Return of Investment is through customer lifetime value. This measure is used to demonstrate the value of individual customer relationships with a brand. The following formula is used by marketers for the calculation of Customer Lifetime Value.
- Customer Lifetime Value CLV= retention rate/(1+discount rate divided by retention rate)
However, there are many challenges and drawbacks for the measurement of marketing return of investment. There are too many factors at play if the real marketing return of investment is to be calculated.
Many marketers narrow down their metrics to a few measures for measuring their success. The overall goal and duration of a specific campaign should be aligned with the short term success metrics. Usage of outdated attribution models can often mislead marketers. The accuracy of the return of investment may be tampered due to this.
Establishing clear goals and long-term objectives are essential for any marketer, before analyzing the return of investments to shaping and altering the policies of marketing.
