This term indicates, in percentage, the monetary return that a company or a business has from profitability through various economic operations.
In practice, it is an indicator that determines how much the company can earn from a certain commercial and/or promotional activity.
ROI stands for Return on Investment, which means return on investment and, in business economics, it is one of the main performance indicators (the KPIs).
The ROI is essential for planning communication campaigns (both online and offline). Indeed, it is obvious that the sum invested should be equal to and preferably less than that earned, to be sustainable.
ROI in web marketing
In web marketing everything is measurable, as we know, and ROI can be generated in a simple and very detailed way.
The entrepreneur who invests will know perfectly well how their investment is paying off.
In a nutshell, they will know how much and how they will profit from the campaign or web marketing activity, in relation to the initial investment.
Thanks to the statistics provided by Google, Facebook, and all other web platforms, in web marketing activities one always knows how well the campaign is doing and what factors need improvement.
You will have data on keywords and web pages, for example, and you will know where to act to increase your ROI.
All web marketing activities are indeed monitorable and scalable (improvable over time by optimizing the investment).
How is ROI calculated?
Very simple: apply the result obtained (the net revenue) divided by the initial investment and multiply it by 100. This will yield a percentage that will give rise to the ROI.
Let's take an example.
We invest 1000 euros in a campaign, we sell 30 products at 40 euros each.
Our revenue will be 1200 (30x40) - 1000 euros invested. So we are at 200 euros.
To calculate the ROI, it will suffice to take 200 (the net income) divided by 1,000 (indeed the investment) and multiply it by 100 to get the percentage, in our example 20%. This is the ROI percentage.
Difference between ROI and ROE
If ROI is the immediate profitability from an investment, ROE (acronym for Return on Equity) is the percentage given by annual net profit divided by the company's net capital and is another factor that determines the profitability of a business.
The ROI is, therefore, an important factor to understand whether a certain activity will be sustainable or not by the company.
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