ROI calculation example
Posted: Mon Jan 20, 2025 8:29 am
ROI calculation exampleLet's assume that the company "ActiveLife" sells equipment for doing sports at home on its own website. For example, the business owner invested money in an advertising campaign, hired content specialists, a videographer and a photographer.The expense item includes the advertising budget, salaries for specialists. As a result, the ROI was negative, which means the business was unprofitable last month. Although this does not mean the failure of the advertising campaign: perhaps the result next month will be different.Wordstat query demand
What is the difference between ROI, ROMI and ROASIt is better to evaluate the return on investment in content marketing not only by ROI. Then the output will be a complete and objective position of the business profitability. For marketing purposes, ROMI and ROAS are additionally calculated. They help to evaluate investment in the context of promotion.
With the help of ROMI, you can find out how well the promotion is going in terms of economy across all channels: the Internet, at exhibitions, conferences, banners on viber database the road, in magazines, etc. ROMI is the return coefficient of all marketing investments. It shows the effectiveness of investments in marketing as a whole.ROMI is calculated using the formula:How to calculate ROMIThe most difficult thing for a business is to calculate all marketing costs. This will include expenses for creating content, maintaining blogs and groups, launching advertising campaigns, participating in exhibitions and conferences.Wordstat query demand
ROAS, unlike ROMI, is calculated when you need to find out how profitable the costs of a particular promotion are. For example, is it profitable to run your own blog or is it better to place ads in industry media.You can calculate ROAS using a simple formula:How to calculate ROASIn a broad context, ROI is used to calculate the payback of a business, ROMI is used to calculate the payback of marketing, and ROAS is used to calculate the payback of a specific channel. It is better to calculate the efficiency of investment by all three metrics at once.Wordstat query demand
Why ROI can be negativeIn most cases, negative ROI is a signal for business. Perhaps it is worth reviewing the project development strategy and reducing costs in expenses. On the other hand, the metric does not take into account the specifics of a specific situation. For example, differences between industries, the characteristics of your target audience and the current situation on the market.Possible reasons for negative ROI:Before drawing conclusions about the business in general and ROMI in particular, it is useful to calculate other indicators: ROMI and ROAS, CPL, CAC, conversion from lead to purchase.What should a business do if ROI is negative:In the end, it may turn out that the problem is with the sellers who miss or poorly process incoming requests. And not with the work of the marketer or SMM specialist. Another possible option for reducing ROI is ROAS below 100%. This means that the selected promotion channel is working poorly and the income received is less than the advertising costs.1. Small sales volume that does not cover expenses.2. Long product sales cycle. For example, a real estate agency that can sell an apartment for 3 months. In the first 2 months, the ROI will be negative, and in the third, after the property is sold, it will be very high.3. Economic errors in calculations. The period was chosen incorrectly, all expenses or all profits were not taken into account.1. Reconfigure advertising campaigns.2. Review the content strategy and promotion methods.3. Monitor the work of the sales department.
What is the difference between ROI, ROMI and ROASIt is better to evaluate the return on investment in content marketing not only by ROI. Then the output will be a complete and objective position of the business profitability. For marketing purposes, ROMI and ROAS are additionally calculated. They help to evaluate investment in the context of promotion.
With the help of ROMI, you can find out how well the promotion is going in terms of economy across all channels: the Internet, at exhibitions, conferences, banners on viber database the road, in magazines, etc. ROMI is the return coefficient of all marketing investments. It shows the effectiveness of investments in marketing as a whole.ROMI is calculated using the formula:How to calculate ROMIThe most difficult thing for a business is to calculate all marketing costs. This will include expenses for creating content, maintaining blogs and groups, launching advertising campaigns, participating in exhibitions and conferences.Wordstat query demand
ROAS, unlike ROMI, is calculated when you need to find out how profitable the costs of a particular promotion are. For example, is it profitable to run your own blog or is it better to place ads in industry media.You can calculate ROAS using a simple formula:How to calculate ROASIn a broad context, ROI is used to calculate the payback of a business, ROMI is used to calculate the payback of marketing, and ROAS is used to calculate the payback of a specific channel. It is better to calculate the efficiency of investment by all three metrics at once.Wordstat query demand
Why ROI can be negativeIn most cases, negative ROI is a signal for business. Perhaps it is worth reviewing the project development strategy and reducing costs in expenses. On the other hand, the metric does not take into account the specifics of a specific situation. For example, differences between industries, the characteristics of your target audience and the current situation on the market.Possible reasons for negative ROI:Before drawing conclusions about the business in general and ROMI in particular, it is useful to calculate other indicators: ROMI and ROAS, CPL, CAC, conversion from lead to purchase.What should a business do if ROI is negative:In the end, it may turn out that the problem is with the sellers who miss or poorly process incoming requests. And not with the work of the marketer or SMM specialist. Another possible option for reducing ROI is ROAS below 100%. This means that the selected promotion channel is working poorly and the income received is less than the advertising costs.1. Small sales volume that does not cover expenses.2. Long product sales cycle. For example, a real estate agency that can sell an apartment for 3 months. In the first 2 months, the ROI will be negative, and in the third, after the property is sold, it will be very high.3. Economic errors in calculations. The period was chosen incorrectly, all expenses or all profits were not taken into account.1. Reconfigure advertising campaigns.2. Review the content strategy and promotion methods.3. Monitor the work of the sales department.