What is ROI in marketing, advertising – how is it calculated.

Marketing has long gone beyond simple advertising. This field of promotion is constantly evolving, which is also important. When studying the topic of strategies in marketing, it is definitely necessary to pay attention to what ROI is and how it works. After all, ROI is a metric that will definitely come in handy when promoting a certain product. 

Moreover, the ROI indicator reflects a certain degree of efficiency. It is often used either in marketing or in assessing business performance. Overall, understanding what ROI is will be useful for everyone who wants to engage in advertising. 

What does ROI mean in simple terms? 

So, what is ROI (Return on Investment). It is one of the key performance indicators of a marketing strategy. It is suitable for evaluating advertisements or any kind of promotion. It allows one to understand how much profit or loss each invested hryvnia brings. In 2024, this indicator remains one of the most important tools for assessing the profitability of marketing strategies and advertising campaigns, especially in the conditions of high competition and limited budgets characteristic of the Ukrainian market.

First, it is important to understand why such a metric is needed at all. ROI helps marketers and businesses assess how effectively their funds are working. 

So, why do such calculations need to be made: 

1. This tool will help optimize the budget. It can determine which channels and campaigns bring the most profit.
2. It also relates to making quick and effective decisions. Profitability data helps to invest in those directions that yield maximum returns.
3. Through this tool, it is possible to control efficiency. Constant measurement of ROI allows identifying weak points in the strategy and promptly correcting them.
4. It is also possible to attract necessary investments relatively quickly. A high ROI demonstrates the success of a business, which can attract new partners or investors.

Thus, this instrument has its calculations. The universal formula takes into account income, expenses, and all this is translated into a percentage ratio. In this case, income is the amount earned through an advertising campaign. Expenditures are the sum spent to launch a marketing campaign. The result is the percentage of success of the marketing strategy. 

A few words should also be said about what can be considered an indicator of success. In the sphere of e-commerce, an ROI of 20-50% is considered good. For large investments, such as SEO optimization or the creation of a mobile application, the payback may take longer, and the ROI will be lower at the initial stages. However, each marketing strategy has its own goals and its own payback Time. 

What you need to know about ROI calculations in marketing:

1. All expenses need to be mentioned in these calculations. Companies often forget to include indirect costs, such as employee salaries or expenses for analytical tools, and this becomes a big oversight. 
2. It is also necessary to accurately determine income. It is not always easy to identify which sales are directly linked to a specific campaign. Analytic tools are used for this purpose. 
3. One should not forget about channel analysis. It is recommended to calculate ROI separately for each channel: contextual advertising, social media, email marketing, and others.

That is, it is also necessary to conduct calculations correctly so that there is something to build on. 

How is such a tool used in Ukraine? 

In Ukraine, marketing strategies are used quite often. Therefore, the corresponding tools are also used. Even in 2024, when the country is in quite difficult conditions, such campaigns are carried out and quite successfully. What factors are important when calculating ROI in Ukraine:

1. First of all, it is necessary to assess the cost of advertising. The costs for advertising on Facebook and Google are rising, which requires marketers to plan budgets carefully.
2. Do not forget about local features. Consider the differences in consumer behavior in different regions of the country. For example, digital advertising has more influence in large cities, while traditional media has more impact in rural areas.
3. Do not forget about currency exchange rates, which are constantly fluctuating. The increase or decrease in the exchange rate can significantly affect the cost of advertising campaigns, especially if foreign platforms are used.

At the same time, this tool can be improved, which will immediately have a positive impact on profits: 

1. First of all, it is necessary to analyze the audience accurately. The more precisely the audience is segmented, the higher the likelihood of campaign success.
2. At the same time, channels need to be tested. Do not invest the entire budget in one channel – experiment and choose the most effective one.
3. Do not exclude analytical tools. For accurate ROI accounting, platforms such as Google Analytics, Facebook Ads Manager, or CRM systems are necessary.
4. An important step will be the optimization of the sales funnel. If the website or landing page does not convert well, even effective advertising will not yield results.
5. The entire process should also be automated. Modern technologies help reduce costs and increase campaign effectiveness.

Thus, it will be possible to slightly increase the effectiveness of the campaign. 

Advantages of using such a tool 

Such a tool has many advantages, which also ensures its safety. What does it refer to: 

1. Simplicity. Even a beginner can understand how the tool works. 
2. The tool is quite universal. It is suitable for evaluating any investments.
3. The tool also helps make well-founded decisions.

Such a tool also has its limitations:

1. It cannot account for long-term benefits. For example, investments in a brand may take years to pay off.
2. It is also not possible to precisely determine income through it. In some cases, it is difficult to link income to a specific campaign.
3. The analysis is also limited. ROI does not show qualitative aspects, such as customer loyalty.

All these nuances need to be considered for the effective use of this tool.