Knowing the profitability of an investment is fundamental in Marketing. To calculate it, the most widespread formula is the ROI (Return On Investment) that allows us to know if the campaign we have done has had a positive or negative economic return for the company.
In this post we will know in depth:
What is ROI?
How the Return on Investment in Online Marketing is calculated.
Online tools to calculate it.
Tips to improve the Return on Investment.
SEO performance What is ROI?
The ROI or Return on Investment is a ratio / formula used by companies to know the results obtained from an investment or group of investments.
Keeping track of the Return on Investment allows us to know if the money invested in a campaign has generated profits or losses in realtor email list.
The objective when calculating the ROI is to know how many euros a campaign has generated for each euro invested.
Why is it important to know the Return on Investment?
The main objective, both Offline and Online Marketing, is to generate sales. Due to this, knowing the return that each euro invested in a campaign has obtained becomes fundamental.
The first reason why ROI is important is because it allows us to know if a campaign, in economic terms, has been successful or not.
Also knowing the return of a campaign helps us to plan the steps to take in the future. In this way campaigns that have had a negative return will be eliminated, improved or replaced by those that do work in planning.
The #ROI is a great help to justify the investments that a company has made in #Marketing
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Important elements to calculate the ROI
Knowing what the objective of the campaign is going to be is fundamental, since it directly affects the rest of the elements necessary to calculate the ROI. In addition, it must be decided before the campaign. The main objectives are:
Economic transaction: companies can create campaigns aimed at selling their products or services. This would be the simplest and most used case within the business environment.
Leads: with this type of campaigns companies seek that users do a certain action on the web, such as filling out a form. The difference with the previous objective is that it has no monetary value at the moment, although it can be in the short or medium term.
Branding: this type of campaign is done to create, maintain or improve the notoriety and positioning that users have in mind over the brand. Calculating the ROI in these campaigns involves a different process that we will see later.
The main objectives of an Online Marketing campaign are: Conversion, Leads and Branding
The KPIs or Key Performance Indicator are those performance indicator metrics that allow us to evaluate if the objectives that we have proposed are being met. For each objective you must establish different KPIs and this is done before carrying out the campaign.
To calculate the ROI it is necessary to know the income, so you have to know the money or monetary value generated by a campaign.
If the objective is to sell products or services, calculating it is relatively easy because they involve a monetary expense.
In lead campaigns, you must give each lead an average value to calculate it. They are usually between € 2-10, although it depends on the case.
In branding campaigns it gets complicated. A little later you can find a section dedicated to this type of campaign and how they are calculated.Budget
Knowing the budget of the campaign is essential to calculate the ROI. Within budget we can find 3 elements that form it:
Material Expense: in many occasions to make the graphic part of the campaign it is necessary to hire or rent materials, workspace and tools. An example would be renting a camera, buying icons for a graphic piece or a room for a photo shoot.
Human Expense: in this section you must collect all the money invested in personnel expenses and management that the campaign has had. For example, you must take into account the hours of the person who has managed the campaign or the time needed to make the graphs.
Investment: some campaigns need an investment, in addition to the expenses mentioned above. With the term investment I mean for example the 2,000 euros that Google charges you in an Adwords campaign or the € 500 that Facebook has charged you.
Formula to calculate the ROI
The return on investment can be known through a formula and is usually expressed as a percentage. With this formula we can know:
The profitability of a particular action.
The ROI of a campaign.
The profitability that an area of the business has obtained.
The return on investment throughout the company.
For this the formula that is used is:
ROI = (Profit – Investment) / Investment * 100
Types of Return on Investment in Online Marketing
We can apply the ROI concept to most channels used in the Online Marketing strategy.
As you know, to calculate the ROI, a basic formula applicable to all cases is used, but taking into account the different nuances of each of these channels. Thus, we can know which actions or which sections we work with are more profitable and can correct those that are not.ROI in the Social Networks
In this section we seek to know the profitability of the social profiles that the brand has. To do this, you must measure the cost of maintaining each social account (management, publications, employees / agency … etc.) And see how many transactions are generated from the networks.
In order to calculate it correctly, it must be possible to measure the traffic to the web generated by each network and the conversions that these visits make through Google Analytics.
Sometimes you can find that by the type of business, product or service, social networks do not directly generate a monetary transaction or lead. This is because social networks can have other functions and help generate branding for the brand:
Social networks is a very good channel of communication with the public.
If they are well worked, they can generate positive branding.
They can generate income indirectly. Many users can be positively influenced by social profiles in their conversion.
Measure visits and conversions generated through social networks with Google Analytics #ROI
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Return on Investment in Social Ads
It is interesting to analyze separately the management of social networks of advertising campaigns that can be done in them. The reason is very simple:
When you carry out a Social Ads campaign, you usually set it up based on meeting an objective (conversion, leads or branding), to do it you have an investment that you must determine before starting the campaign and also have some expenses in materials and management.
Being a specific goal, you have to analyze some KPIs that may be different from the ones you use to measure social networks or other advertising campaigns.
To calculate the ROI in Social Ads campaigns, you should consider the following:
Investment in advertising as such.
Costs of creation, configuration and management of the campaign, that is, the time employed by the person in charge.
Revenue generated, if it is a conversion campaign, or the value of the leads obtained. How branding campaigns are calculated we will see later.
Analyze separately the investment in social networks and social ads campaigns #ROI
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Return of Investment in SEM
For all types of online advertising campaigns that you carry out, it is essential that you calculate the return on investment you have obtained. This is very important so that you can correct those that are not profitable and thus stop losing money or invest more in those that have a better result.
Calculate the ROI in this type of campaigns is usually easier than in the rest, as the tools themselves provide statistics of objectives met and income obtained. Although the tool already provides you with the necessary data, it would be convenient for you to also review them through Google Analytics.
To calculate the ROI in SEM, the necessary data are very similar to the ones that must be obtained in Social Ads:
Total investment destined to the campaign and that has been consumed. (It may be the case that the entire budget is not spent).
Costs of creation, management and optimization of the campaign itself.
Cost of materials used in advertising such as banners or video pieces.
Earned income or value of the total leads generated.
** The advisable thing to measure economic transactions is to previously configure the products in Analytics so that it can be calculated correctly. To calculate Leads it would be necessary to assign a value previously in Adwords.
Return on investment with Influencers
In Marketing every time you work more with people who are recognized and followed by thousands or millions of people. Currently, these types of campaigns are being used by brands to show products, services and even to make themselves known to users.
Hiring an influencer requires an investment, so it is important to know to what extent that campaign has been profitable and, if you have done one before, compare the value that each influencer has generated.
To be able to measure exactly what an Influencer has produced you can use URL Builder that generates specific URLs and that you will give to each influencer. In this way in your analytics you can see what each user has done and what influencer comes from.
As always, in order to calculate the ROI you should know:
Investment / cost that has had to hire the influencer or influencers.
Materials, products and any material used to create the campaign.
Revenues generated by users who have entered the web thanks to the tracked URLs of the influencer or influencers.Return of investment in Email Marketing
Email Marketing has not died and shows that companies are still using it, and a lot. Companies usually bet on this type of campaign because it does not have a high price and allows them to reach a large number of users at once.
As in all campaigns it is very important to know the performance that the campaign has had since, although the economic investment is not high, it can happen that the creation and management does provoke more expenses.
In most cases this medium is used to create campaigns that have a commercial purpose such as publicizing new products / services and offers.
In order to calculate the Return on Investment in Email Marketing campaigns, it is necessary to:
Know the total investment made. For this, it will be necessary to know expenses in the tool used, the person or agency that has managed the campaign and if a resource has been needed.
Know the income generated by the campaign. To be able to do it with accuracy, it will be necessary to measure with Google Analytics the conversions generated by the users who have entered from the sent email.
Although the investment in Email Marketing is small, always calculate the associated expenses #ROI
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ROI in SEO
SEO positioning is one of the most important disciplines in Digital Marketing. Therefore, it is essential to measure the profitability we are obtaining with the work done in this section.
It is also one of the most difficult to calculate ROI, since short-term results are rarely observed. Although it is enough for many companies to increase the number of traffic to the web, it is important to know their profitability. In order to calculate the Return on Investment in SEO, it is necessary to:
Know all the expenses involved in the management, from hours spent on audits, search for keywords, changes, improvements and creation on the web and content to possible expenses in links or hiring of writers to generate content.
Measure through tools like Google Analytics how many times the users who have entered by organic content have fulfilled the objective marked economic transaction or lead and bring these results to economic terms to know the generated income.
REMEMBER: take into account the spending on personnel, in creativities, analysis and even tools that each of the strategies has. Do not stay only in the investment.
Real example of how the ROI is calculated
Pedro has an e-commerce in which he sells all kinds of sports products. The company has created profiles on Facebook, Instagram and Twitter. As he is a person who does not have much time and does not understand social networks, he has hired a Community Manager to carry social profiles and create content.
After two months of work with the Community Manager who works part time and charges € 1,000 per month, Pedro wants to know if the social profiles are profitable or not.
After analyzing what users who have entered from the RRSS to the web during the last two months have done, Pedro observes that:
Thanks to Twitter he has made 15 monetary transactions that have generated € 500.
Users who have entered from Facebook have made 25 purchases for a value of € 1,200.
With users who have entered from Instagram and who have made 40 purchases, they have paid € 2,200.
For publications, the Community Manager has spent € 100 on templates, images and graphic resources. In addition, another € 200 in the rental of a camera to take pictures of the products.
If Pedro wants to know the return on the investment he has made in social networks, he should:
Know the complete investment: € 2,000 (CM salary) + € 300 (resources). Total: € 2,300.
Calculate the income obtained for each profile: € 500 (Twitter) + € 1,200 (Facebook) + € 2,200 (Instagram). Total: € 3,900.
Realize the ROI formula (Revenue – Total investment) / total investment * 100
In this case Pedro would get a result of: 69.56%, that is, for every euro invested in social networks Pedro gets € 1.69.
Calculating the #ROI of your campaigns you know how much money has been generated per euro invested.
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Online tools to calculate the ROI
With this ROI calculator you can know the return on investment in a detailed way. You just have to put the data on Investment, Income and the time the campaign lasted (whether they are days, months or years).
The results you will get will be:
Benefits, since it discounts all the investment made in the campaign.
The ROI for the campaign / strategy in percentage.
Annual return that strategy would have. Even if you choose a time less than a year, it also calculates it.
A graph in which you can see visually what you have invested versus the benefit.Can ROI be calculated in Branding campaigns?
As I said at the beginning of the post, there are usually three types of objectives when creating a campaign in Digital Marketing. Previously, we have seen how to calculate ROI for campaigns that target transactions or leads, but what about Branding campaigns?
This type of campaigns seek to increase the notoriety that the brand has, are not focused on the sale and require a different treatment. Therefore, the first thing to do is establish KPIs that allow us to assess the before and after the campaign, such as:
Direct traffic to the web
Number of searches of the brand name in Google.
Number of followers in social networks (in each one separately).
Mentions and comments to the brand on social networks.
The problem that we find when carrying out Branding campaigns is that they can not be evaluated at the moment, since they are focused on medium / long term.
In a first phase you can compare the KPIs before and after the campaign, but after a while you have to analyze whether it has had an effect on sales or not. This way you can know if a branding campaign has been successful.
Learn to calculate the Return on Investment in #ROI Branding campaigns
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Real example of how a Branding campaign is calculated
Pedro, after seeing the success of his social profiles, decides to make a Branding campaign through the three social networks. The objective is to publicize your brand and gain notoriety in the market. To make the campaign, invest a total of € 1000. The Community Manager manages the campaign within its working hours and does not need to buy graphic material.
In a first phase after the campaign, and taking as an example of KPI’s that we have put above, Pedro gets the following results:
Direct traffic to the web: + 40%
Number of searches of the brand name on Google: + 25%
Number of followers in social networks: + 37% on average between 3.
Mentions and comments to the brand on social networks: + 54%
With this first analysis we can see that Pedro with € 1,000 has achieved a growth of his notoriety by + 39% on average.
In a second phase and after a few months, it is time to see if the Branding campaign has had a positive effect on sales. For this, it is necessary to analyze the sales that were obtained before and after generated by the RRSS in similar periods of purchase.
Bonus: if you understand Google Analytics you can see if the conversions generated and the ones assisted by your social profiles have grown after having made the campaign or not. This can help you see if the Branding campaign has been successful and see if it has had a real impact on the sales of your business.
How can ROI be improved?
▷ Meet your target
When a campaign is conducted it is essential to know what audience you are addressing. Having a knowledge of your target allows you to:
Reduce the risk of error when carrying out the campaign. The more you know about the public, the easier it will be for you to succeed in the campaign and reduce the uncertainty.
The badly invested budget is reduced. By knowing your target, you will not have to make so many corrections in the campaign and therefore the budget will be more optimized.
Increase the chances of achieving your goal. Knowing your needs or motivations will make you can make a much more effective campaign and your results are better.Usability
Usability is an increasingly important term, which refers to the ability to interact with a website in an easy, simple and intuitive way. The greater the usability the easier and better experience users will have.
If you want to sell a product or service, fill out a form or know your brand, a bad web usability can ruin all the work achieved in the campaign, since users will leave the website frustrated to be a difficult website to use Of course, in this section, your website is responsive.
Therefore, the return on investment can be affected for good or bad by the usability of your website. Take care of him!
The #ROI can be affected for good or bad by the usability of your website. Take care!
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The CRO is closely related to the return on investment, in fact it seeks to improve the ratios and conversion processes of a website. This is because a good job of CRO means that the page to which you direct your campaign is optimized so that the marked objective is fulfilled.
For this you must:
Analyze how is the behavior of users on your website.
Have the objectives to get very defined.
Test the process or possible processes to meet the objectives.
Make decisions and make the necessary changes so that the road is more optimized.
Keep analyzing the results.
It is an essential element to improve the return on investment. If you do not measure and observe the behavior of your users, you will not understand the process they follow on your website and your entire campaign will be based on assumptions and that is very dangerous.
Measure allows you to see the evolution of a campaign and check the actual results that the campaign has had in your company. It is also the main source of information that you should consult to compare the results you have obtained.
As you can see, the need to calculate the ROI in Online Marketing is essential. For any campaign carried out, it would be ideal to calculate it and thus be able to defend the work done supported by numbers that reinforce the position and importance of the Marketing department within the company.
How do you calculate the Return on Investment of your Online Marketing campaigns? Would you add any other tool to this list? Tell us your experience!