Definition: Marketing ROI
What is marketing ROI?
Marketing ROI, or return on investment, is a broad term that indicates how a company's marketing efforts drive profit and revenue growth. The term "return" can mean different things to different organizations. This depends on the strategy and the kind of campaign efforts individual companies choose to implement. Broadly speaking, marketers often measure marketing ROI as the ratio between sales growth and marketing spend.
Depending on the organization's business model and strategy, marketers leverage specific marketing cost analyses to calculate marketing spend and the quality of it. A thorough marketing cost analysis usually includes current and potential expenditures, both short-term and long-term results, and the weight of individual campaigns on multiple channels, across all touchpoints
Calculating marketing costs and the revenue generated helps companies to strategize future campaigns while increasing cost-efficiency. A clear overview of a company's ROI is often conducted by CMOs and marketing managers in comparison to competitors. These insights allow marketing teams to further strategize their campaigns and adjust their marketing efforts to face industry-specific challenges effectively and maximize revenue even further.
How does measuring ROI benefit marketers?
Calculating marketing return on investment helps marketing managers make business decisions and optimize marketing efforts, allowing marketers to increase marketing efficiency while maintaining low marketing costs.
Measuring ROI allows CMOs to identify top spending priorities, allocate resources and budget accordingly, and secure budget and resources for future campaigns. Today, marketers market and promote their products and services on a myriad of digital channels. To maximize the impact of these campaigns, they often use specific combinations of digital channels and assets. A marketing cost analysis that sheds light on which of these channels and assets best drive revenue allows marketers to strategize how to effectively distribute marketing budget.
Marketers regularly analyze marketing campaigns to measure their success and establish baselines for future reference. By calculating the precise costs, ROI, and impact of individual campaigns, marketers can identify which channels and strategy best fit their marketing goals while maintaining high levels of cost-efficiency.
