ROI is a way of measuring the profitability of a project. Use the Feefo ROI calculator to easily work out your marketing profit or loss.
Every business needs to be able to easily calculate whether their latest marketing campaigns are helping or harming their company.
Despite there being ample measurements to track and dig into, making sure you’re assessing the right ones is paramount to understanding whether you need to make a change.
Return on investment (ROI) is a common way of evaluating the profitability of your performance. Learn why you should be using it and try our quick ROI calculator tool below to discover the profit or loss of your campaigns.
What is ROI?
ROI is a metric that many marketers use to calculate the amount of money spent on a project, compared to the amount of revenue that has been generated.
While tools like NPS, customer reviews, and surveys allow businesses to gain insight into customer satisfaction, ROI helps them to understand how profitable their recent marketing activities have been.
Revenue alone is a useful metric to measure, but it’s even more powerful to businesses when framed in comparison to any costs. That’s what return on investment is: a way to measure spending efficiencies and general success.
Why is ROI important?
ROI can be applied across a wide range of industries, but it can be particularly useful for marketers because it:
- Enables businesses to quantify their marketing spend
- Helps businesses to plan future marketing budgets
- Identifies campaigns that were especially successful
- Highlights areas of investment that are not performing as expected
- Allows businesses to measure competition within an industry
Return on investment has become a standardised, universal metric that helps companies to understand the efficiency of a project.
The best way to put ROI to the test is by monitoring it correctly and closely. Brands that regularly track the ROI of their marketing campaigns will be able to quickly identify success, work on areas of improvement, and maximise their spending in the long term.
What is a good ROI benchmark?
A ‘healthy’ or ‘good’ ROI in marketing should prove that a business is making more revenue than what they are spending. The exact figure depends on a number of factors like marketing strategy, distribution channels, and industry.
For example, ROI is often used within PPC and Paid Social advertising. For these two marketing channels, the ratio of 5:1 is generally used as an industry benchmark for return on investment. This figure indicates that for every £1 of advertising spend, a business is making £5 in return.
A 10:1 ratio represents an exceptional return on investment, and anything below 2:1 is often considered as not profitable. This is due to the cost of production, distribution, and marketing cancelling out any profits because the margin is significantly smaller.
Using ROI calculator to measure another marketing channel that doesn’t directly result in revenue, like content or organic social marketing, can be more difficult. The main aim of these strategies isn’t usually to generate transactions and they may not have a cost figure to calculate the ROI.
Instead, businesses may want to consider other factors to use when calculating ROI. These could be reach, traffic, and audience growth.
A generic ‘benchmark’ ROI that’s applicable to all marketing channels across all industries doesn’t exist, so businesses should look to their past performance to set out a suitable benchmark. Reviewing past campaigns and current data enables companies to calculate a good ROI that’s relevant, realistic, and tailored to them.
How to calculate ROI
The ROI calculator in its most basic form, you will need to divide your net profit by your total spend. The ROI formula is:
ROI = net profit / total spend x 100
However, to gain the most accurate return on investment, you may want to also consider additional factors that can have an impact on profitability. For example, the total number of orders, traffic, and average order value.
To help you work out your marketing return on investment, enter your monthly metrics into our ROI calculator below. Estimates are based on data from genuine customer reviews*
Discover your business’s ROI today with Feefo
Here at Feefo, our experts can help you learn how to take your business further with specialist resources and industry-leading customer feedback tools. To find out how we can help you, try our ROI calculator and get in touch with our friendly team today.
