Return on Investment (ROI) is a measurement on the performance of paid marketing or other campaigns to determine whether the “investment” was profitable or not.
ROI attempts to measure the exact return, in profit, from a given campaign. Calculating ROI is as simple as dividing the return of an investment by the cost of the investment. The result will be a percentage or a ration.
ROI = (Current Value of Investment – Cost of Investment) / Cost of Investment)
Why is Return on Investment Important?
The most important variable for every business is: return on investment.
When it comes to determining the success of your business, especially any marketing or ad campaign, ROI is a calculation that summarizes those results.
ROI gives a clear, measurable number to determine the success and outcome of your efforts. If you are buying ad space and keywords that result in high traffic and high conversions, the result from your advertising would yield a high return. Knowing this, you can make the decision to adjust your marketing spend to generate the best possible ROI.
Alternatively, ROI can be used to evaluate other metrics of a business, not just its profitability. When it comes to social marketing, ROI might refer to the amount of social engagement that a campaign received. It all depends on how you or your marketing team defines success.
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