In this section we will explain how to calculate and analyze ROI and the impact it has on your digital advertising campaigns.
What is ROI?
ROI is the acronym for “Return On Investment”. It is an economic formula whose objective is to calculate the profit obtained from business actions, in this case in online marketing actions.
What it tells us is what percentage of profit we have achieved with sales over the total money invested in them. In other words, how much we earn from our marketing efforts.
Why is it important to calculate and analyze the ROI of your digital advertising campaigns?
Calculating and analyzing the ROI of your digital advertising campaigns is key to evaluate their effectiveness and optimize advertising strategies.
To analyze ROI you need to know the revenue and investment in the campaign or marketing action. It is important to follow a process that includes identifying marketing objectives, defining key metrics and using analytical tools to track and analyze results.
A careful and rigorous analysis of the results allows identifying improvements in the areas and obtaining a maximum return on the investment in advertising.
Digital advertising is a powerful tool to promote your business, product or service. However, it can be difficult to know if you are getting the most out of your campaigns. To make sure you are making the best use of your budget and maximizing ROI, it is important to calculate and analyze the results of your digital advertising campaigns.
What is needed to analyze ROI?
One of the main advantages of digital marketing is that almost everything is measurable. Thanks to this, you can follow practically all user interactions with your business (visits, clicks, orders, downloads, etc.) and control, measure and analyze the effectiveness of your campaigns through ROI.
To calculate ROI you need:
This is the income obtained by the campaign we want to analyze. We can calculate the overall ROI of the entire marketing investment and that of the campaign or specific actions separately. It must be clear where each income and benefit obtained comes from.
This is data on the costs of the campaign or marketing action and the total money invested to carry it out. To have accurate ROI data you must take into account all the expenses involved (payment tools, creativities, personnel costs according to the time invested, etc…).
How is ROI calculated?
To calculate ROI we must apply its mathematical formula: ROI= (Revenue – Investment) / Investment.
The final result is usually expressed as a percentage, so the final result is multiplied by 100. So, ROI = ((Revenue – Investment) / Investment) x 100.
We create a re-marketing campaign in which we invest a total of 5,000usd. At the end of the campaign we obtain a profit of 20,000usd. Therefore, applying the formula:
(20000 – 5000) / 5000 = 3
The ROI of this fictitious campaign would be 300%. For each euro invested, a profit of 3 dollars has been obtained.
As marketers, we use analytics tools to improve the performance of digital advertising campaigns and obtain a higher return on investment (ROI). By analyzing metrics such as impressions, clicks, cost per click (CPC) and cost per impression (CPM), we determine which strategies work and which we should adjust. This allows you to make informed decisions on how to allocate your marketing budget to maximize your ROI.