ROI is the acronym for Return On Investment. In finance, return on investment, also called the rate of return, rate of profit or simply return, is the relationship between the amount of money earned as a result of an investment and the amount of money invested. Through this indicator, it is possible to know how much money the company is earning – or losing – with each investment made.
This includes everything that is done for some future profit, such as marketing campaigns, sales training, acquisition of management tools, new customer retention strategies, etc. That being said, it is clear not only which investments are worthwhile, but also how to optimize those that are already working, to have a better performance.
ROI can be calculated in several areas such as:
- Content Marketing ROI;
- Email Marketing ROI;
- Social Media ROI;
- AdWords ROI for campaigns;
- Corporate Blog ROI;
- SEO ROI, etc.
How to calculate the ROI
Use the formula:
ROI = (revenue-cost/cost) x 100
This formula can be used comprehensively – to analyze the business as a whole – or specific – to evaluate a project or area, individually. Working in this way, it is possible to identify errors and problems in any part of the business.
In addition, the final result will be in percentage, which facilitates the comparison between the ROI of different actions or strategies. You can build a spreadsheet where you can centralize all of your calculations, but if you`re not willing to spend the time on it, it is possible to find several pre-build spreadsheets – going from free to paid – depending on how do you want to have the metrics in your database.