What is return on investment (ROI)?
ROI measures the return organizations receive for investments in marketing activities such as advertising, direct mail, social media campaigns, and event sponsorships. Measures are often based on different types of “conversions,” which can include product sales, social media impressions and interactions, and click-throughs to Web pages.
How ROI works
A direct line
ROI draws a direct line between funds that are spent on a marketing campaign and the outcome of the expenditure. It measures what was tangibly produced by the campaign, including sales and other results.
Digital and social has changed the way organizations think about ROI, primarily because of the ease with which data can be gathered. Data can be used to create strategies for longer-term online engagement with potential consumers.
While sales and revenue are almost always top of the list when it comes to ROI, "softer" measures help marketers determine how broad a reach a campaign has had and make changes to it in real time to make a campaign more successful.
Why ROI matters
The landscape is competitive
Companies can no longer afford to spend on marketing that doesn't work. It's not just having to explain to the bosses why a campaign didn't work, it's knowing the competition is probably doing it better and beating you to consumers.
It's an evolution
By establishing real measurements for marketing campaigns and activities -- drawing as direct a line as possible to results -- organizations build a body of evidence over time about audience and consumer behavior that can hone future marketing efforts.
It keeps focus
Marketing campaigns can go in many different directions and lurch out of control. ROI keeps organizations focused on the prize at the end of the journey and prompts smart decision-making along the way