All You Need to Know About ROI of a Marketing Campaign

The Return On Investment, or ROI, has often been the measure used by chief marketing officers, chief executive officers, or other C-level executives to make the key decisions in regards to spending on marketing. If we look at it simply, every business strives to make profits. There is an expense, and there is revenue coming from it. If you subtract the investment from revenue, you will get the net income, which can be negative or positive. If you divide the net income by the expense or investment and multiply by 100, you will get the return on investment in percentage.

The purpose of every partnership marketing campaign is to have a positive ROI, which means you are getting more than you are investing. ROI has become a popular metric because of its versatility and simplicity, but a lot needs to be considered to calculate the ROI. In this post, we will look at all the things you need to know about the ROI of a marketing campaign.

How to calculate the ROI of a marketing campaign?

The most basic way to calculate the ROI of a marketing campaign is to take the sales growth of a product or service of that business, subtract it from the marketing cost, and divide it by the marketing cost.

If you want to consider the industry’s average numbers, the ROI of 5-7% on a digital marketing campaign is considered good ROI. This means if you have earned $5 for every $1 spent, you can count your marketing campaign as a success.

Large companies usually spend 2-10% of their revenue on marketing. It is a huge chunk of investment. Therefore, companies ensure that an investment reaps good returns before spending on marketing.

ROI = (Sales Growth - Marketing Cost) / Marketing Cost

But, there is a little trick in calculating the ROI of a marketing campaign. You need to take into account the actual sales growth, which means the growth in sales from the existing sales trend as a result of the marketing campaign. Thus, the ROI of a marketing campaign is often calculated over the long term by making comparisons of total sales growth to average organic sales growth.

What are the variations in measuring the ROI?

Using sales growth is the most basic way to measure the return on investment, but there are a lot of variations in measuring the ROI of marketing campaigns.

For example, if the goal of a marketing campaign is to create brand awareness, then the sales matrix will not be ideal to evaluate the impact of the campaign. Therefore, it is evaluated based on the media value earned in the form of likes, followers, impressions, etc.

Soft metrics describe indicators related to the value which deviate from traditional “hard” metrics such as net profit margins. Thus, it requires an integrated approach to evaluate the ROI of a marketing campaign.

Various business assessment tools provide the holistic framework to measure the ROI of a marketing campaign.

What is the importance of measuring the ROI of a marketing campaign?

The ROI of a marketing campaign essentially tells about the effectiveness of a marketing campaign, which helps C-level executives make key decisions. It helps decision-makers in the following ways:

● Allocation of marketing budgets

● Changes in the marketing strategies

● Setting up the KPIs

● Measuring the success of a marketing campaign

● Comparison with competitors

So these are the few important things you should know about the ROI of a marketing campaign.

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