The Importance of Determining Marketing Return-On-Investment (ROI)

By Michelle Matura Hentzell

As budget dollars become scarcer, determining an ROI on marketing investments becomes more important than ever. ROI does not only tell you the cost of the campaign but it tells you the effectiveness.
You may ask, “How do you determine campaign effectiveness?” First, you want to start with establishing your goal and then think about what types of measures would help you get to your goal. Here are a few examples:

• Number of leads
• Revenue generated
• Number of web hits or visitors
• Sales Volume

There are many ways to determine ROI but the most common are expressed in terms of a dollar amount or as a ratio. The formulas are simple.

The dollar amount formula shows how the campaign increased profit.
(Cost savings and earnings) – (Dollars invested) = ROI

The ratio formula shows, in dollars, how much you got back for every dollar invested.
(Cost savings and earnings) / (Dollars invested) = ROI

It is important to measure every marketing initiative to determine its success or possibly its failure. But, if the campaign is not a success, then you can re-evaluate and not run the same type of campaign again.