The Importance Of ROI: How It Helps Evaluate Business Decisions

Victoria Berezhetska

Copywriter

6 minute read

Whether it be in retail, online maps, websites, apps, surveys, CRMs, or social media, data is all around us. But apart from data-driven approaches, enterprises also need to focus on insight-based decisions. 

Businesses often rely on marketing analytics to get a better understanding of user behavior, engage and track prospects effectively, drive growth, and deliver high ROI. Without accurate and relevant data, marketers cannot make educated decisions and ensure ROI attribution.

Let’s explore the significance of return on investment in more detail and examine how enterprises can use this metric to elevate client satisfaction to yield greater results.

Understanding The Role Of Marketing ROI

It’s no secret that marketing ROI helps brands justify resource distribution and marketing spend for ongoing and future ad campaigns. Ultimately, calculating it helps businesses strategize and fine-tune their marketing output. 

Here are a trio of practical tips on how to use ROI to your advantage:

Measure Ad Campaigns And Determine Baselines

Brands can accomplish both tasks through meticulous marketing ROI calculation. It will help evaluate the impact of individual campaigns on revenue growth and find the perfect combination of online and offline initiatives. As for baselines, brands can use them as a reference for mapping out future strategies.

Ultimately, ROI can help enterprises optimize their efforts and enhance the overall impact.

Leverage Competitive Analysis

Businesses are no strangers to competitive analysis. After all, competition is the necessary fuel for development. That is why comparing your marketing efficiency with rival companies can come in handy, especially if you’re looking to adjust your KPIs and baselines.

While you cannot obtain detailed information on another company’s ad campaigns and invested resources, some of it is publicly accessible, which means that you can reflect on it.

Ensure Effective Distribution Of Resources

In some cases, it can be hard to put your finger on the campaigns that require additional funding. Since businesses use numerous combinations of channels, tools, and touchpoints to drive leads and increase sales, effective distribution of resources is of the essence.

How To Calculate ROI

It might seem like there is nothing complicated about marketing ROI calculation. But here’s the thing: marketing experts often need to consider numerous crucial factors like hidden costs, time, or related fees. In that case, the formula can change. 

For instance, if we’re talking about sales, consider using the following formula: 

(Sales Growth – Organic Sales Growth – Marketing Cost) / Marketing Cost = ROI 

But if we’re talking about a specific software purchase that can potentially ensure revenue growth, the formula will look like this: 

(Financial Benefit After The Purchase – Cost Of The Software) / Cost Of The Software = ROI

Finally, if you need to calculate marketing ROI, here is one of the common methods:

(Incremental Value Gained From Marketing Investment – Cost Of Marketing Investment) / Cost Of Marketing Investment = ROI

But let’s put aside formulas for a second. It’s no secret that businesses often use various tools that contribute to the effective shift of resources, customer journey improvements, and accurate ROI calculations. Here are some of them:

• Google Analytics: It is one of the essential tools that can help enterprises measure the performance of their ad campaigns, determine if they require optimizations, obtain a list of traffic sources, and understand their audience better.
• B2B software like Phonexa: It can provide powerful tools for deeper income-boosting insights into all of your web and call leads. Enterprises can leverage lead scoring, comparison reports, identification of trends, and real-time issue spotting as part of its all-in-one marketing automation solution for calls, leads, clicks, email, SMS, accounting, and more. 
• CRM: It helps nurture relations with clients and gather crucial customer data. For instance, integrating your CRM with a B2B software can enhance your lead tracking and automation capabilities.

Key Takeaways

Measuring marketing efficiency helps enterprises identify particular segments of their strategies that require optimization, learn how to fine-tune their marketing output, modify the ad spend, and identify specific tools and B2B software that can further empower their employees.

Learn how to boost the efficiency of your campaigns and apply data-driven decisions effectively with the help of Phonexa’s experts.