Return on investment (ROI) is a measure of the profit earned from each investment. Like the return you earn on your portfolio or bank account, ROI is calculated as a percentage. In simple terms, the calculation is:
(Profit – Investment)
Marketing campaigns are investments. And as with any smart investment, you should measure, monitor and compare them to other investments to ensure you are spending your money wisely.
Return on Investment Value
ROI calculations for marketing campaigns can be complex -- you may have many variables on both the profit side and the investment (cost) side. But understanding the formula is essential to producing the best possible results with your marketing investments.
With solid ROI calculations, you can focus on campaigns that deliver the greatest return. For example, if one campaign generates a 15% ROI and the other generates 50%, where will you invest your marketing budget next time? And if your entire marketing budget returns only 6% and the stock market returns 12%, you probably need to reassess your marketing investment strategy.
ROI also helps improve your ongoing campaigns. Growth Panel allows you to tweak campaign variables to compare ROI and focus on the version with the best performance.
With Growth Panel, you can calculate ROI for existing campaigns and project ROI for future campaigns. This helps you justify marketing investments and avoid slashing profitable marketing budgets in tough times. By focusing on ROI, you can disabuse others of the concept that marketing is a nonessential expense and demonstrate that it is the engine that drives revenue generation.
ROI Tools in Growth Panel
Determine How to Use ROI: Evaluate your existing measurement tools and determine how much effort to devote to ROI.
Confirm Formulas with Finance: Review other relevant formulas with Finance including cost of goods (COGs) and gross profit.
Establish an ROI Threshold: Determine the minimum ROI goal for all your campaigns.
Calculate Total Marketing Investment: Determine the entire cost for a specific campaign.
Calculate and Track ROI: Use inputs to project ROI for future campaigns, and track ROI against projections for existing campaigns. Use the results as a guideline to determine whether to launch specific campaigns.
Evaluate Alternate Calculations: Explore alternate metrics for different scenarios.
You might need to address return on investment if:
You view marketing as an expense rather than an investment
You’re not currently projecting and tracking ROI
You automatically slash the marketing budget when times get tough
You can’t determine which of your marketing campaigns generate a positive return and which generate a negative return
You use anecdotal evidence when deciding on different types of marketing campaigns
What they’re saying...
Your tools have helped me identify what questions to ask to program directors, as well as to admissions reps, and develop marketing campaigns with logics (sic) and clear target numbers behind them. Also, creative briefs are very handy when communicating with my writers and designers. They eliminate the room for confusion and misunderstandings that used to occur during the creative development stage."
Director of Marketing, The Musician’s Institute
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