How to measure the return on investment (ROI) of your advertising budget?

Every effort and investment made by a brand must be measured, and that is exactly what ROI does. Return on Investment or ROI is the value economically generated as a result of different actions. This parameter allows us to quantify the performance obtained from an investment.

When investing in digital marketing campaigns, it is necessary that each decision is planned in such a way that the gains obtained with each action can be determined, in comparison with the amount invested in them.

The return on investment allows us to know the return ratio of an investment. The higher it is, the more profitable the campaigns are.

Depending on the channel the brand uses as well as its line of service and/or product, it is important to have cataloged the number of services or products and their average cost.

The ideal as a company or marketing area is to know the gross margin that each of the services or products handles, that is, your selling price minus your production and administration cost. It is important to cost not only the advertising budget being invested in advertising but also the investment in human capital. All this together helps us to know the return on investment (ROI) as accurately as possible.

Once having these points, and starting to develop Adwords or social media campaigns, at Brand Industry we recommend registering and measuring the leads, that is, the people who are coming through the online channel. It may sound very easy, but when an advertising campaign is successful, there comes a point where if a record is not kept, the human memory cannot handle so much information capacity about each lead, and thus have accurate data.

Registering the leads in a simple and daily manner either in a CRM or in an Excel table and recording their data and the channel through which they arrived gives us the guideline not only to register how many clients are arriving but also how many times that client is returning. For example, to observe if the client contracted any extra service or a strong business unit, returned for more products, recommended the brand, etc. And thus not only measure how much it cost you to bring the client once but also how much they are returning to hire a service or acquire a product.

Similarly, at Brand Industry, we recommend that the return on investment measurement is performed periodically, usually every quarter, as this way the advertising campaign is developed, and the records of each client are available.

At the moment when the period is closed, the ideal is to have the records of how much was invested in the advertising campaigns and how much was invested in time or fees, having these investment data and the benefits obtained, a simple operation is done to know the return on investment.

ROI = ( revenue – investment costs ) / investment costs

The value of ROI is commonly expressed as a percentage, so if you want to know the percentage of profit from your investment, you must multiply the ROI by 100.

In summary, determining ROI allows knowing the profits obtained due to the publication of ads on social networks, as well as on Google Adwords. ROI also helps decide how and where to invest the budget.