What is The Return On Investment Formula?

return on investment formula

Return on investment formula in the online marketing world is the formula that encompasses the level of monetary success that is a result of online marketing activities & especially the conversions. You should be aware of its different states so that you’ll be able to better handle your marketing cash flow.

So How To Does The Return On Investment Formula Looks Like?

In the online marketing world it looks like this:

Return\quad On\quad Investment\quad =\frac { Revenue\quad -\quad Investment\quad }{ Investment }

It’s important that you understand that the revenue & the investment are directly related to the same marketing activities.
The return on investment is expressed as a percentage and as such can express how efficient was the online marketing budget spent in generating revenue. So a low value of ROI represents inefficient marketing spend vs the revenue while a high value of ROI represents the opposite meaning.

The Return on investment formula can also be either negative of positive. The negative value is produced in case the revenue was less than the investment, while a positive value is produced when the revenue is more than the investment.

How Should You Treat The Return On Investment Formula?

The return on investment formula enables you to compare your marketing activities overtime & identify a trends of growth or loss in cash. Furthermore you can compare similar periods and their ROIs in order to prepare your business to changes in the market which are seasonal.

You should always be aware of not getting a negative value that can be received from the return on investment formula, unless this negative value is planned as part of penetration strategy to new markets and is supposed to become positive after the establishment of the brand in those new markets.

 

 

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