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To be effective, every company should define exactly what is meant by a particular term. Creating your own glossary is part of our service offering. On this page you will find a general definition of the most important service areas of Marketing ROI Experts to help you: Lead and Funnel Management, Marketing Automation, Marketing ROI and Data-Driven Marketing.
Marketing Return On Investment (ROI) refers to the monetary return achieved as a result of targeted measures in relation to the budget invested.
The ROI formula is as follows:
ROI is a financial indicator and expresses the return on investment. The investment is usually easier to determine because the marketing budget and, if a complete approach is taken, the personnel costs are also known. As marketing usually has a wide range of tasks including market research and branding, it is important to only consider those investments that have been demonstrably made with the intention of generating additional sales in a foreseeable period of time. This turnover is then the starting point for calculating the return.
ExampleA company sells an item at a unit price of €100. The margin (sales minus manufacturing and distribution costs) on this item is 50 % = €50. The company needs another €10 to ship and process an order. The revenue per unit sold is therefore €40. If the company now implements a marketing campaign with a budget of €10,000 and sells an additional 300 of the above-mentioned items, it generates a gross profit of €12,000 (€40 X 300). The campaign costs of €10,000 must be deducted from this gross profit, leaving €2,000. This €2,000 is the return generated from a €10,000 marketing investment. The ROI is therefore € 2,000 / € 10,000 = 20 %. A positive ROI underlines the usefulness of the measure and is the basis for further investments. In other words, the marketing ROI translates activities into results.
In addition to individual campaigns, ROI can also be measured at department level so that a complete statement can be made. In practice, many questions arise regarding the delimitation of costs and sales, the definition of time horizons for measurement and the attribution of individual actions in the customer journey. Here it is important to find a consensus that satisfies all parties involved.