How analyzing ROI will help you improve your ad campaigns
Analytics is a very important part of marketing. It’s kinda a doctor for us. To know more about your organism and health, you go to a medical specialist, he examines your body and makes a diagnosis. The same story is with analytics. To understand the current state of your ad campaign you need to measure it with the help of performance measurement. As a result, it will help you to manage every your ads at every stage of the life cycle — from campaign setup and bidding through to scaling and optimization.
Fairly often on the arbitration cases, you can see an index so-called ROI. It helps to measure the company thrives.
Let’s see an example. In one month it was spent a certain amount of money and earned N amount, that gave 300% of ROI. At first sight, you can say that the effectiveness drew up 300% and “it’s super cool, let’s spend it.” Although the index of ROI isn’t so simply, and this is the time to put everything in its place.
An Introduction to Return on Investments
So what the ROI exactly means? Let’s find out. ROI is an index of recurrence. It is used when you want to evaluate the return on investments in percentage.
Before buying chips into the project, investors determine the value of it. That is why they count the ROI.
Let’s take a look at some frequently asked questions about ROI.
What is ROI?
In marketing and advertising, ROI is an acronym of return on investments. It’s a calculation that divides a new profit by the investment.
The goal of measuring ROI is to evaluate the efficiency of a spend or to compare the efficiencies of several investments.
ROI shows the approximate income level, that can be possible after investment. Coefficient is suitable for calculation and analysis of ad campaigns.
In the sphere of investments, the index will show how much revenue brings the investition. For example, the foundation of your business can bring you $30,000 per month, in turn, expenses will be $300,000 - that means you will get 10% of your consumption every month.
In digital advertising, the index defines how much profit will bring different creative projects. As the expenditure, you have to except all the expenses that are spent on a launching program, as a revenue gain from all the clients that buy your product.
Why is ROI so important?
Today marketing is based on data. Metrics that show you traffic increase, new followers and visibility are not enough. Heads of the company want to know how much revenue make marketing and advertising campaigns. The index of ROI shows how effective ad campaign or investment performance are, and what percentage of income you have for each invested dollar. The more this index is, the more revenue you have.
Most marketologists have several goals that determine their strategies. Let’s see those:
- Brand awareness and positioning in the market.
- Lead generation.
- Enlargement of leads and their conversion into sales.
- Receiving of the target customer.
- Increasing the number of loyal customers.
Each of these goals includes several touch points with the client.
Some common misconception in measuring the ROI in affiliate marketing
There are some misreading in this industry. Let’s take a look at them:
“Social media ROI is about quality traffic.” Actually, it’s just a half of the picture. Social media ROI is also about developing social contacts, networking, and relationships. You can’t track this in your analytics.
“Marketing automation can’t give measure results in full” , but has a lot of analytic tools for marketing. Marketing automation replaces high-touch and repetitive manual processes with automated solutions. It focuses on moving leads from the top of marketing funnel to the bottom of it and becoming the sales-ready leads.
“Keywords are not actual anymore”, well, a system of the search has changed, but not that much. Every marketing system still needs to pick a name for the page and write a good headline for the article or something else. It is necessary because indication of relevance for the page using the words and phrases.
ROI analysis in advertising
In addition to advertising costs, you have to take into consideration other expenses to calculate the coefficient.
In order to calculate how much is one attracted lead, you have to know:
- Average advertising costs.
- The number of interests from the transaction that will be paid to a manager.
- The cost of advertising department services.
- Additional indicators
Make a habit of analyzing ROI every month. In the end, it would give you an advantage in front of competitors that don’t make detailed statistics. Knowledge about coefficient of ROI allows you increase the revenue and distribute them competently.
How to calculate ROI?
In order to determine the effectiveness of your ads at driving revenue, learn how to calculate ROI indexes. If you know for sure how much you spent on the ad campaign and what revenue it generated, counting ROI is going to be easy for you.
The simplest way to count ROI is to subtract marketing costs from a total profit of the company, and then divide a rest on them. Thus, with the help of ROI you can understand the effectiveness of your investments in advertising.
If ROI is higher than 100%, it means your investments bring a gain. If ROI is less than 100%, then investments are unprofitable. It’s important to track the ROI at all the stages of the ad campaign. It will help to increase the effectiveness of the ad and distribute the budget correctly.
Basic formula of ROI
We described the fundamental relationships between the income of the company and investments on it. ROI is an integral index that feels every various internal change in your business or project.
There are few ROI calculation formulas. This one is used more often:
ROI = (Income - Cost price) / Amount of investments * 100%
Income is a final profit from a sale of the product or service
Cost price includes costs for the purchase of the product, delivery, production, marketing, and advertising costs, etc.
Amount of investments is the amount of invested funds.
Let’s see the example
We know that income of the company is $500.000 with the total amount of sales $3.125 thousands. Looks good, but if a total value of production joins the game, the picture of ROI will change. If the cost of the equipment and other attachments is $25 m the situation is changing.
A formula of ROI will be the next: 500.000/25.000.000 = 0,02 or 2% (not so big revenue, as you can see).
What are the main data points you should present to the C-Level, boss or upper management to show the effectiveness of ROI in your business project?
If you have to report to your C-Suite then focus on the bottom of the funnel, tell about lead generation. There are two most important metrics.
- Conversion rate
- Total Leads
ROI app marketing is calculated in the following way:
Total traffic * Conversion rate = Leads
Source: TopRank Marketing
How to increase the ROI
First what you need to do is to make an analysis and identify weaknesses. Then work on the moments that act bad or enhance that gives the best result.
Also, estimate download and working speed of your app. Users like when everything works perfectly.
Try to understand if the design of your product associates with your product or service. Is the information that you provide to the customers clear?
Odds of ROI or why ROI catches fancy?
Essentially, ROI is most popular because of its simplicity in usage. You can compare ROI of one company with other. This metric rate is the most used index of profitability and performance. To put it briefly, ROI shows the effectiveness of investments decisions.
While we work with pretty much all app categories