ROi_EinsteinFrom social media to link building, every online marketing effort and activity has its meaning and value for an online business. But the bottom line is that all this should lead to ROI (return on investment), one of the best metrics to show the efficiency of marketing and advertising investments.

ROI may have a simple formula (gain from investment – cost of investment)/(cost of investment), but it is actually a pretty complex metric. If analyzed and used properly, ROI can be a very powerful metric that will give you precise indication of what marketing channels and what tactics generate the most profit and that will help you shape the future marketing and advertising strategies.

But with great power comes great responsibility. In order to get the most of ROI data, you should follow 10 simple commandments:

1.    ROI is ineluctable

Not measuring ROI would mean not being aware of what you’re spending, on what you’re spending and if has any results. Even in the beginning of an online business you should think primarily about investments and growing a business and not about immediate profit, after a time ROI should appear on the list of metrics.

2.    Do your math!

ROI is the final metric. But before getting to calculate the ROI you should gather much more data. Here are some examples of statistics and variables that you should keep track of: conversions per channel, investments per channel, investments per period of time, etc.

3.    Use the best tracking options

ROI has a real value only if it’s calculated using exact data. There is a various range of tools that you can use to track numbers that correspond to each channel and each form of advertising. Make sure you install and configure these tools correctly, and that you follow them up to get the best data.

4.    Use ROI for decision making, but don’t obsess about it

ROI is relevant especially when used for precise campaigns that run on a determined period of time. On the other hand, brand awareness can have a tremendous value for a business, but it takes time to be built up and start showing its fruits. ROI is primarily a financial indicator so you cannot rely on it for everything. Try to see the big picture and don’t make business decisions, no matter the context, relying solely on ROI.

5.    Always compare the ROI

ROI is relevant when put into a much broader perspective. You have to have a better goal than a positive ROI and a good way to assess the performance is by comparison. ROI can be compared against the previous month ROI, against other campaigns ROIs, or the industry average.

6.    Integrate with other metrics

ROI needs to be explained and to do so you have to follow all the steps of the conversion funnel. Monitoring prospects, leads, and conversions is an essential step in further analyzing how you obtained this ROI and how you can maximize it.

7.    Never forget ROI is about money

You can use ROI to evaluate which online marketing channel generates most sales. ROI can show you which investment worked better and what channel you should insist on. But never forget that this is a financial metric and doesn’t always resonate with long term strategies. And that it has a very different meaning when used by a marketer and when used by a financial director.

8.    Saving should not be the main goal of using ROI

Saving is a good thing for every company. But this is not the way to look at ROI.  This metric has primarily the potential to show how a strategy can be redefined to bring more sales. Therefore, the primary focus should be on which channel performs best and how you can maximize the return on investment, not on what to cut down.

9.    There’s only so much you can get out from one marketing channel

Every marketing channel has its potential. You can assess this potential by searching the average ROI. If an investment can give a return that’s far exceeding the industry and the channel average, that’s great. But in the beginning, when you’re setting your ROI objectives, you should keep expectations realistic.

10.    Acknowledge the fact that ROI is versatile

Although it can be calculated through a simple mathematic formula, ROI has to be a part of more complex analysis of marketing investments and their results.  This metric has many uses and applications if interpreted differently and if correlated with different other metrics.