7 Key excerpts on "Marketing ROI"

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  eBook - ePub

  Financial Terms Dictionary - 100 Most Popular Financial Terms Explained

  • Thomas Herold(Author)
  • 2020(Publication Date)
  • THOMAS HEROLD

    (Publisher)

  What is Return on Investment (ROI)?

  ROI is the acronym for return on investment. This return on investment is among the most often utilized methods of determining the financial results that will arise from business decisions, investments, and actions. ROI analysis is used to compare and contrast both the timing and amount of investment gains directly with the timing and amount of investment costs. Higher returns on investment signify that the results from investments are positive when you compare them against the costs of such investments.

  Over the past couple of decades, this return on investment number has evolved into one of the main measurements in the decision making process of what types of assets

  and equipment to buy. This includes everything from factory equipment, to service vehicles, to computers. ROI is similarly utilized to determine which budget items, programs, and projects should be both approved and allocated funds. These cover every type of activity from recruiting, to training, to marketing. Finally, return on investment is often employed in choosing which financial investments are performing up to expectations, as with

  venture capital investments and stock investment portfolios .

  Return on investment analysis is actually used for ranking investment returns against their costs. This is done by setting up a percentage or ratio number. With the vast majority of return on investment calculation methods, ROI’s that are higher than zero signify that the returns on the investment are higher than the associated expenses with it. As a greater number of investments and business decisions compete for funding anymore, hard choices are increasingly made using the comparison of higher returns on investment. Many companies believe that this

  yields the better business decision in the end.

  There is a downside to relying too heavily on the return on investment as the only consideration for making such business and investment decisions. Return on investment does not tell you anything regarding the anticipated costs and returns and if they will actually work out as forecast. Used alone, return on investment also does not explain the potential elements of risk for a given investment. All that it does is demonstrate how the investment or project returns will compare against the costs, assuming that the investment or project delivers the results that are anticipated or expected. This limitation is not unique to return on investment, but similarly plagues other financial measurements. Because this is the case, intelligent investment and business analysis also relies on the likely results of other return on investment eventualities. Other measurements should also be used along side the return on investment to help measure the risks that accompany the project or investment.

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  eBook - ePub

  Return on Investment Manual

  Tools and Applications for Managing Financial Results

  • Robert Rachlin(Author)
  • 2019(Publication Date)
  • Routledge

    (Publisher)

  Because ROI is recognized as an acceptable measurement technique, its value is unquestioned. It is used by investors, the business community, the financial community, economists, and students of business techniques and applications. ROI is also important because it provides management with an easy and understandable mathematical calculation. This calculation is used to enhance the decision-making process through better planning, by assisting in the evaluation of investment opportunities, by evaluating management performance, and by evaluating the overall position of the company in relation to the marketplace. What Is ROI? Return on investment is a management tool that systematically measures both past performance and future investment decisions. In other words, it is a financial tool that measures historical and anticipated results. ROI rests on the assumption that the best alternative investment is one that maximizes profits. The definition of ROI depends upon the investment base used. If equity is used as the denominator base, the definition is “return on equity.” If assets are used as the base, the definition is “return on assets.” The numerator is the profit expected from that investment, such as before taxes or after taxes. Like the investment base, it can vary. The ratio for return on investment is earnings divided by investment. Table 1-1 illustrates some of the variations that can exist and the differing titles used to describe the ROI concept. Note the various data used for the numerator and denominator. These are just a few of the examples of how return on investment is calculated. Therefore, ROI can be considered a generic term and must be specifically defined before calculations can be made. The key to remember is that the calculations must be consistent with historical data and with other comparative data. For example, you must be consistent with the same calculations when comparing return on assets of last year with those of this year

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  eBook - ePub

  Marketing Communications

  • Lynne Eagle, Barbara Czarnecka, Stephan Dahl, Jenny Lloyd(Authors)
  • 2014(Publication Date)
  • Routledge

    (Publisher)

  That said, there can be no doubt that the benefits of monitoring and measuring levels of return have the potential to yield huge benefits. An understanding of the relative levels of potential return can be used to maximize the value obtained from limited marketing budgets. It can be a persuasive tool when bidding for funding and, on an individual level, can be used as evidence of success when seeking career advancement.

  Yet in order for ROI systems to be effective, marketers must first have a definitive vision of what they are trying to achieve and how it might best be measured. This requires an organization to have a clear understanding of their current position and an effective process of objective-setting at all levels. Only then are marketers in a position to measure the relative effect of their actions.

  Review questions

    1. Define what is meant by the term ‘return on investment’ within a marketing context.

    2. Distinguish between the terms ‘return on investment’ and ‘marketing effectiveness’. Why do you think these terms are sometimes, if mistakenly, used interchangeably?

    3. What are the benefits of measuring return on investment and/or marketing effectiveness? What are the challenges?

    4. Discuss the importance of ‘objectives’ within the context of an IMC campaign. Why are they so essential to the measurement of ROI and marketing effectiveness?

    5. Distinguish between the following concepts and explain their value within the measurement process:

  • pre-testing

  • tracking

  • post-testing.

    6. The objective of an IMC campaign is to increase the sales of sun hats from 120,000 to 160,000 per annum. However, it is very successful and actually generates sales of 180,000. What is the percentage effectiveness of the promotion?

    7.

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  eBook - ePub

  Bottom-Line Call Center Management

  • David L. Butler(Author)
  • 2007(Publication Date)
  • Routledge

    (Publisher)

  For a manager to make an argument for his/her center’s solid performance, he/she must demonstrate this to the boss in a report, which has some form of logical and rational numerical support and measurement. Stating that “My center is great. My employees are happy and the customers seem to like us” without any support will only serve to have a domestic center move faster along the cycle to overseas outsourcing and the manager seeking other employment opportunities. Wise executives in a company/organization will seek hard and fast numbers to justify the performance of a call center. Now, most call centers with the latest technology will be able to produce reports ad nauseam. However, what do these reports mean? What value does that add to the center? What do they communicate to the executive on how the budget was spent most effectively or revenue stream per person generated? Remember, the rule about running a business is to bring in more money than you spend. This is called profit. The higher the profit the better because the profit can be reinvested into new opportunities and human capital to generate even more profit. Though governments and non-profits do not have the same profit reporting functions as do for-profit companies, this does not mean that these organizations are not concerned with the most efficient means of production possible—a strong ROI. Though the goal is not the same as a for-profit company, the logic behind the efficiency remains the same. To make the best sell possible to the leaders of the company or organization, a manager must be armed at all times with data to justify the centers’ existence and value added to the company/organization. If this cannot be established, the center will eventually disappear.

  Return on Investment

  Brief History

  ROI has been around since before the 1920s. In recent years, ROI has expanded to a wide range of investments, including human resources, training, education, change initiatives, and technology. Today, hundreds of ROI calculations have been created or are under development for programs. “As long as there is a need for accountability of … resource expenditures and as long as the concept of an investment payoff is desired, the ROI process will be used to evaluate major … investments” (Phillips, Stone, and Phillips, 2001, pp. 2–3).

  Why ROI?

  Developing a strong and balanced set of measures, including measuring ROI, has gained a strong position in many fields. The topic of ROI appears through conference proceedings, on the cover of newsletters, and as the focus point of journals, both trade and academic. Clients are requesting that ROI calculations be conducted for various programs and initiatives within their division or unit, both in private and in public sector organizations. Even top executives in major companies have increased their knowledge and interest in ROI related information (Phillips, Stone, and Phillips, 2001, p. 12).

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  eBook - ePub

  Maximizing Benefits from IT Project Management

  From Requirements to Value Delivery

  • José López Soriano(Author)
  • 2016(Publication Date)
  • CRC Press

    (Publisher)

  A second possible cause of ROI deviation occurs when one of the parameters used in calculations is not considered key, either because its potential impact is deemed negligible or it was assumed to not influence the planning horizon of the project. The project outcome then shows an ROI that is different than expected, with that difference being due to the parameter that was minimized during ROI calculations. Nevertheless, the cause should be reviewed and managed to avoid this problem in the future. In this case, we should examine the assessment model as a whole, making note of how the parameters affected the accuracy of ROI calculations.

  Finally, The ROI may be inaccurate because of simple errors made in calculating it, or in estimating values used in the calculation. In this case, we must simply correct any input errors made and recalculate the correct ROI value.

  Despite the difficulties associated with ROI calculations, this approach is a great tool for supporting the decision-making process on projects and investments. It introduces a level of professional rigor into project management in a manner similar to that done for the selection of financial investments in the world of economic and financial management.

  ROI Concepts

  ROI is a simple measure of the expected profit or loss result of a particular investment, which may take the form of returns, receipts, revenue, interest, or capital, and represents an increase or decrease in the assets of the investor. This metric is systematically used for making investment decisions based on predictive economic and financial indicators of value resulting from an investment’s performance and behavior.

  ROI enables a uniform framework for financial comparisons, such as:

  • Selection of financial investments of any kind
  • Selection of alternative investment projects
  • Comparison of financial results of companies and industries

  ROI use requires the adoption of certain precautions to ensure the homogeneity of the data obtained. Among the precautions that can be taken into account, we should pay particular attention to the following:

  • We must determine how local and national tax laws will affect the investment project. In principle, if we are comparing investments or projects that will all be influenced by the same tax laws and rates of taxation, then the contrast should be negligible and the effect of taxation can generally be ignored, simplifying the ROI calculations. However, if the investments comparison involves different countries, different tax regimes, or different tax reporting timeframes, it then becomes desirable to provide tax details in the ROI calculations. Otherwise, any subsequent decisions made could be suboptimal when the effects of different tax structures are not properly accounted for.

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  eBook - ePub

  Event Sponsorship

  • Ian McDonnell, Malcolm Moir(Authors)
  • 2013(Publication Date)
  • Routledge

    (Publisher)

  Chapter 8 Measuring ROI (return on investment)

  Learning outcomes After reading and discussing the contents of this chapter, students will be able to: •  explain the importance of evaluation; •  outline different forms of evaluation; •  detail the meaning of ROI and assumptions involved in measuring it.

  Introduction

  As sponsorship has been embraced as a tool in the marketing activities of companies and brands, so has the increase in research measuring the impact of sponsorship programmes. The impact of sponsorship has also altered from being about the measurement of logo impressions to deeper measurement of the sponsorship in relation to the specific market segment on which the sponsor wants to make an impression. A demand for financial accountability and budget contestability among the other marketing tools has been the main driver.

  Valuing sponsorship

  While the landscape of sponsorship continues to change (Howard and Crompton 1995) the director of consumer influence operations at General Motors said ‘If cuts in our ad budgets are made, the first thing to go is events sponsorship, because nobody knows what they are getting’ (Penzer 1990, p. 162).

  ‘You can’t tally up everything on Monday morning and ask if participation in an sports event was successful’, said Steven Cross, then corporate event manager at AT&T (Chicago Tribune 1990, Mike Meyers, Minneapolis – St Paul Star Tribune, Feb 19).

  John Beckthen, pro sports marketing manager at Miller Brewing, stated ‘I have yet to see a scientific formula definitely showing sales results from a sporting promotion. A lot of it is gut feel’ (Chicago Tribune 1990, Mike Meyers, Minneapolis – St Paul Star Tribune, Feb 19).

  The research on the effectiveness of sponsorship has evolved over time as techniques have become increasingly sophisticated. Most of the research in the 1980s and 1990s was based on calculating the number of impressions generated, column inches of media or competition entries.

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  eBook - ePub

  A Crash Course in Email Marketing for Small and Medium-sized Businesses

  • John W. Hayes(Author)
  • 2013(Publication Date)
  • Harriman House

    (Publisher)

  12. Understanding Your Return on Investment

  It might sound crazy, but many marketers don’t understand the Return on Investment (ROI) they are getting from their email marketing campaigns. This might be because email marketing is considered too low cost (or cheap) to really worry about. But remember, there is no such thing as cheap or expensive marketing.

  I believe, if you don’t have a clear understanding of the value of your marketing campaigns, you should not spend another penny until you have the mechanisms in place to track your investment.

  Calculating ROI

  You don’t need to be a mathematical genius to work out your return on investment from email marketing.

  The formula can be as simple as: total sales generated from email marketing/total email marketing spend = ROI You may need to employ simple analytical software like Google Analytics (it’s free), which allows you to track your subscriber’s journey from the initial click-through to the final sale.

  But when email marketing is so cost effective is there any real need to worry about tracking its success?

  The answer to this question is simple. If you don’t know how successful your email marketing is (even on a small scale), you might not see how big the opportunity actually is. Let me tell you a story about a client (names and scenarios have been changed to protect the innocent).

  Geoff sold shoes. He sold every type of shoe you could possibly think of from the daintiest dance pumps to size 15 rugby boots. He didn’t specialise, because most of the time he didn’t know what he was buying until it arrived in his warehouse. He bought cheaply, mainly grey market and distressed inventory. As a result his product lines were as diverse as his customers.

  For a small business, Geoff was actually very organised with his customer data. His e-commerce and email marketing software were linked together via the Salesforce.com

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