ROI Return on Investment

ROI (Return on Investment) is a metric used in the business world to evaluate the profitability of an investment in relation to the costs expended. In the context of advertising activities, ROI refers to the effectiveness and profitability of advertising campaigns or marketing activities compared to the financial resources spent on these activities.

Calculation:

ROI is usually calculated using the following formula:

ROI = ((revenue-cost) / cost) x 100.

Thereby stand:

• Revenue for the additional proceeds or profits directly or indirectly attributable to the advertising campaign.
   
• Costs for the expenses incurred in planning, implementing and executing the advertising campaign.
   

How should the ROI be interpreted?

A positive ROI means that the advertising measure generated more revenue than it cost and is therefore considered profitable. An ROI of 0% means that the revenues have just covered the costs, while a negative ROI indicates that the advertising measure has caused losses.

Example of use:

Suppose a company has invested €1000 in an online advertising campaign, generating €2500 in additional revenue. The ROI would be calculated as follows:

ROI = ((2500-1000) / 1000)) x 100 = 150.

An ROI of 150% indicates that the company has generated 150% of its advertising investment as profit.

ROI measurement is important for companies to monitor and optimize the efficiency of their advertising spend and make informed decisions about which advertising efforts are most successful.

What is a good marketing ROI? 

A "good" marketing ROI can vary depending on the industry, company size, marketing objectives and market conditions. There is no set definition for what can be considered a good ROI, as it depends heavily on individual circumstances. A marketing ROI that is considered excellent in one industry may be considered average in another.

In general, however, it can be said that a positive ROI should always be the goal. An ROI of 100% would mean that the marketing activity generated exactly as much profit as it cost, which would be acceptable in most cases. An ROI above 100% indicates that the marketing activity was profitable, while an ROI below 100% indicates that the activity generated less profit than it cost.

For some companies, especially those with large advertising budgets, an ROI of 200% or more might be considered very good. Smaller companies or those in highly competitive industries might be satisfied with an ROI as low as 50%.

It is important to look at ROI in context and match it with company goals and market and competitive conditions. A long-term approach to ROI assessment is also useful, as some marketing activities may take time to achieve their full impact.

In addition to the absolute ROI figure, it is advisable to consider the quality of leads or sales generated, as well as other factors that may not be directly reflected in ROI, but can still have an impact on long-term business success.