Understanding the Importance of ROI

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Understanding the Importance of ROI

Return on Investment (ROI) is one of the fundamental components of your business. As a business owner, spending time and money on certain campaigns, products, technology, etc. to increase your profit and obtain new customers should be at the forefront of your mind. What’s tricky about ROI, however, is its degree of uncertainty. As a business owner or Marketing Manager, you are able to make an educated guess as to whether a new product, service, or Marketing campaign will be successful with your customers but you cannot be certain.

Despite this uncertainty, it’s important that you understand the importance of ROI to your business and how solid Marketing practices can help you increase your business’ success.

Understanding the Importance of ROI to Your Business

ROI refers to the degree of success resulting from the investment of a product or service by a business. The higher the ROI the better as it indicates achieved success or profit. Essentially, the company gets what they paid for. Marketers especially need to be aware of ROI when designing new campaigns and content for their business. They are able to determine whether a particular investment is worth the time and money by using the following ROI metric:

ROI = Net Income/Investment

This metric looks at the division between the net income or return of a particular project against the investment or resources that were committed to the project. This provides an estimate of the success of a campaign or project.

Having this information is valuable to marketers. A high ROI indicates a successful project which marketers and business owners can internalize and refer to when making future investments that have similar qualities to the original project. A low ROI, which tells the marketers that the return was not as great as the investment, can also be useful as it educates business owners as to where their business is weaker or unfit for certain markets. This allows them to adjust course by taking a different approach to the same problem or turning their attention to a different market or investment.

Incorporate ROI into Your Marketing Plan

It can be argued that ROI is the most important metric for marketers. As a Marketing Manager, you need to be aware of the success of your content and campaigns. Spending large amounts of time and money creating new campaigns around your products and services is a waste of time if you do not have some idea concerning the degree of success. It’s important to get a sense of current consumer behaviour and preferences of your customers so that you can market to them effectively.

In this world of intense competition and information overload, your customers are continuously bombarded with content from you and your competitors. It is your job as a marketer to ensure you stay top of mind with your customers and maintain their attention. Knowing the success of your investments and where your money is best put to good use goes a long way to guaranteeing the success of your business.

Article by Courtney Rosebush

Courtney Rosebush, Content Contributor
LinkedIn: www.linkedin.com/in/courtneyrosebush
Twitter: https://twitter.com/cmrosebush

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