ROI stands for “Return on Investment”, a metric used in marketing to determine how much a company has earned or lost based on the investment made. In marketing, it is a metric that must be taken into account and not lost sight of, as it is one of the main indicators of whether a campaign is successful or whether, on the other hand, it is not hitting the mark.
In fact, in our experience as a marketing agency, we have seen how a correct ROI measurement can turn a campaign with discouraging results into a high-performance one.
Specifically, ROI is widely used in growth marketing because this methodology seeks to find growth opportunities on a constant basis.
That said, if you’ve made it this far, it’s because you’re interested in knowing the most effective way to measure ROI in growth marketing campaigns, as well as all the factors that need to be taken into account to improve ROI. And that’s what we’re going to talk about.
Take this article as a guide that contains everything you need to boost the ROI of your growth marketing campaigns. Let’s get started!
Methods for measuring ROI in growth marketing campaigns
Let’s start with the most important thing. In this section, we want to talk to you about both the mathematical formula used to obtain the ROI in a growth marketing campaign and some tools that you can use to obtain the necessary data you need to apply the formula.
The basic formula for calculating ROI
ROI is a metric expressed as a percentage, and obtaining it is really simple. You simply have to subtract the amount of investment made from the income obtained, divide the result by the investment and multiply the result by 100.
When we talk about income obtained in the ROI formula, we are referring to the net return we have obtained, that is, the net profit we have left after paying all the costs.
To make it clearer, we will give you an example. Imagine that you have invested 20,000 dollars in a campaign and have obtained a net income of 24,000 dollars. The formula applied to this case would be as follows:
- ROI = (24,000-20,000/20,000)x100
- ROI = (4,000/20,000)x100
- ROI = 0.2 x 100
- ROI = 20%
The end result of this example shows that the campaign has made 20% profit. Therefore, profits have been generated, indicating that your campaign is profitable. But is 20% a good or mediocre ROI?
In this case, a 20% ROI means that for every dollars invested, you have obtained 1.20 dollars. In principle, this is positive and a sign that the campaign has been profitable and successful. However, to evaluate it, you have to take into account factors such as the time in which this ROI has been obtained and the niche or sector in which it has been obtained. For example, achieving a 20% ROI in a month may be positive, but in a year, it may not be so positive. In the same way, this ROI in a market saturated with competition may be very good, but it may not be so good in a growing market. In short, you have to take into account the context in which you obtain the ROI in your growth marketing campaign.
Useful tools and platforms to measure ROI
Typically, the platforms through which you launch your campaigns or web analytics tools will provide you with enough data on their performance to allow you to calculate the ROI. For example, in the Google environment, you can use the free Google Analytics tool to track your conversions. We also recommend other platforms, such as HubSpot or Marketo, which can offer you more detailed information so that you can better understand the impact of your campaigns.
We recommend that you do not use a single tool to measure ROI in growth marketing, as combining several will give you a more complete view and will allow you to detect potential problems with greater probability.
Practical examples of calculating ROI in a campaign
To help you get the most out of this metric, we want to continue with the previous example, where we got a 20% ROI. Now, imagine that you got that ROI from a Meta campaign where your ad was shown on both Facebook and Instagram.
The 24,000 dollars in profits have not been obtained equally from both social networks, as it is most likely that one has generated more income than the other, but the question is: which one has generated more ROI? In other words, the platform that has generated more income does not necessarily have to be the one that has provided us with a higher return on investment, as everything will depend on what is invested in each one.
To do this, we can apply the ROI formula to each platform, but to do so, we first need to know what we invested in each social network and its benefits. Let’s suppose that in the Facebook campaign, we invested 12,000, which generated 15,000 dollars in benefits, and in the Instagram campaign, we invested 8,000, which generated 9,000 dollars. The next step will be to calculate the individual ROI of each platform.
Done! With the ROI, we can clearly see which campaign has had the best return on investment and by how much. This can be interesting for future campaigns because it helps us to know which channel generates the best results and which one we should invest more in.
Factors that affect ROI in growth marketing
We have already mentioned that ROI should not be viewed in isolation; rather, other factors should be taken into account, such as the time it takes to achieve it and the sector. If we really want it to provide us with valuable information, we must see it in context.
In this section, we discuss other factors that must be taken into account when drawing conclusions from this metric.
- The economic situation: In periods of recession or economic instability, consumers tend to spend less. This can affect your business’s ROI despite having followed the same campaign strategy.
- Investment strategy: Your investment plan for the campaign will also affect the return on investment it generates. For example, choosing a long-term investment may give you a good ROI, but in the same campaign, a short-term investment may not. This is something you need to consider.
- The customer life cycle: For example, if acquisition costs are high because a lot of money is being invested in attracting customers, the ROI may decrease. Another case could be that customers stay with the company for a short time, causing a high decrease in ROI. Therefore, in order to improve the ROI of our growth marketing campaigns, it is very important to optimize the customer life cycle as much as possible.
How to improve ROI on your growth marketing campaigns
Finally, we want to give you three very important tips so that you can boost the ROI of your growth marketing campaigns and obtain very positive results.
1. Segment your audience well
Properly segmenting your growth marketing campaigns will ensure that you actually reach the people who are interested in your brand, and, therefore, your conversion possibilities will increase, resulting in an improvement in ROI.
This, in turn, will prevent you from wasting resources by reaching the wrong audience. Ultimately, segmenting your audience well helps you invest your money better in your campaigns.
2. Adjust campaigns continuously
When launching an online campaign, the ideal is not to sit back and wait to see what happens. Instead, we recommend that you make the necessary changes periodically to optimize results. For example, you can change the budgets so that more investment is allocated to the ad or ads that perform best.
3. Do A/B testing
Before launching the final campaign, you can test different ads with a smaller investment. This will help you find out which type of ad works best and help you invest more safely and successfully in the final launch.