Return on Investment (ROI)
Return on investment (ROI) is one of a few key metrics that serve to measure the effectiveness of an investment. It shows the ratio of profit and enables quick comparison between all marketing platforms to help budgeting.
In case that retailer uses more than one marketing platform, it is quite complicated to measure the ROI of each platform. For this purpose, itโs necessary to join cost, turnover and profit data and that is why Roivenue is so valuable. Roivenue continuously calculates this data, visualizes it and even provides a historical view.
In this way, you are able to manage your business based on the most relevant KPIs. Monitor these metrics carefully and see if an increase of investment for particular sources will increase your turnover or profit adequately.
The scope of values range from -1 to positive infinity. From -1 to 0 means that the investment wasnโt profitable, a value of 0 means that the investment broke even and values higher than 0 means that the investment was profitable.
As with CPA, it's important to include all of your costs to have more exact results. For example, a tactic frequently used by PPC agencies reporting the ROI of PPC campaigns was not including their fees in the calculation. Such a manipulation causes PPC ROI to seem higher when it could even be negative
Why can't I see ROI in Roivenue?
โAs mentioned above, calculating ROI involves precisely determining expenses, or at least, using the same process each time. ROI just has too many interpretations and the inter KPI comparisons are problematic.
Therefore, it is better for marketers to use metrics such as ROMI and mROMI. These metrics use only marketing investments in the calculation and have only one logical interpretation. Use ROMI and mROMI for your performance measurement and your comparisons will become accurate and precise.
Parameters
Calculation: ROI = ( netRevenue - totalInvestment ) / ( totalInvestment )
Example: ROI = 1 000 000 - 100 000 / 100 000 = 9
Unit: Number
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