Why ROI or Return of Investment is so important
Return on investment (ROI) is an elementary in order to measure the sales generated by each euro invested in a campaign, either online or offline. They are widely used in content marketing strategies as a formula to know the result of them rigorously. Because impressions, clicks and ‘likes’ serve to measure the results of online advertising campaigns in terms of exposure and scope maybe, but not in terms of the budget used. But…
HOW IS THE ROI CALCULATED?
It is a very simple formula:
And it is necessary to apply it in all those occasions in which we want to know the effectiveness and profitability of starting up a strategy or project since it relates the investment with the profits obtained. An example: if you dedicate 15000€ to carry out an event and you get a profit of 45000€, the return on investment would be (45000-15000) / 15000 = 2. By multiplying that figure x 100 we can know the return on investment if it had gone 0.1 would be the 10% return, but in this case, it has turned out to be 200%, that is, of every euro invested in the event you get a return on investment of 2€.
THE MOST IMPORTANT PART: INTERPRETING THE RESULTS
The higher the ROI, the more profitable the campaign is. In case the ROI is negative that means the project is not profitable and we would be losing money. It can be done at any time in the strategy process to know, for example, when it becomes an unsustainable project and have no losses. Calculating ROI becomes critical to being able to invest in the future with certainty that it is not going to be a bad decision.
This formula has certain limitations: It does not take into account the duration of the campaign and this is also elementary to take into account to visualize the ROI since it is not the same 20% in a month that in a year. In addition, it should also be taken into account that there are some actions and strategies that, despite not generating a direct benefit, give the brand another type of benefits in the form of a pleasant experience on the brand or an increase in reputation.
ROI IN SOCIAL MEDIA
In Social Media, to be able to find the ROI, you must help from the KPIs. You can find out what they are here. For some of them, it is enough to observe, for example, the number of impressions, the scope of the publications or the interactions that they make with them (with the number of retweets in the case of Twitter). As well as the traffic of a landing page or the mentions that the community does about the brand. The following indicators are more specific and have to be calculated:
– Conversion rate or the number of leads achieved: the number of visits received on a particular website or on the Facebook page.
– CPC or PPC (Cost or price per click): It marks what was paid for each user click on ads made via Google Adwords.
– CTR: nº clicks/nº impressions x 100.
TIPS FOR INCREASING ROI IN CAMPAIGNS
Video helps increase ROI by 50%.
Includes calls to action.
Select keywords carefully.
Choose the most appropriate platforms and follow them.