Metrics like impressions, clicks, and “like” serve to measure the performance of online advertising campaigns in terms of exposure, interest and involvement. However, these metrics do not focus on costs and cash income.
To measure this, it says admetricks, a company that measures the impact of online advertising, there is ROI, defined as the return on investment and is calculated as sales divided by cost.
The ROI we can quantify economically if our advertising campaign was or not the monetary success we were expecting. It is responsible for showing in detail how generated for sale every peso we spent on the campaign.
To calculate the ROI, should be measured sales and costs based on an elapsed time and a traffic source attribution . That is, we must divide sales directly generated by a source in costs, both in the same time interval.
There are tools like Google Adwords and Analytics which help us to extract this information and to make the calculation. Some companies choose to make their own reports to more accurately calculate the ROI.
And what good is the ROI?
We can give an example. Suppose in our bicycle accessories company decided to spend $ 200 on advertising on Google (source attribution) and 100 in Yahoo (source attribution).
At the same time, we hereby affirm that we would invest $ 300 only in campaigns that deliver us a return on investment of 40% in a month.
We decided to invest $ 200 in Google and Yahoo 100. 30 days later, we note that advertising on Google, we recover only $ 70 in sales, or an ROI of 35% (70/200). While on Yahoo, we recovered $ 45, with an ROI of 45% (45/100).
In total, we invested $ 300 in our campaign and we recovered 115, which gives us a ROI of every campaign 38% (115/300).
We do not meet our goal of investing over 40% return. But if we invested more in Yahoo, which attracted us was the ROI (not necessarily more sales), and not so much on Google, itself the be fulfilling. And this is what we will do next month to achieve the goal of having a higher ROI than 40%.
As explained by the example, thanks to ROI we can make better decisions and optimize our budget.
You have to record that the numbers we throw the ROI will be evaluated as positive or negative based on the goals we have set ourselves, that is based on a minimum ROI, which depends on the strategy defined by the company.
If we work campaigns based on an ROI, and the company strategy is to invest in campaigns that bring a defined minimum return, then the concept becomes less important campaign budget. At the end a company will want to spend all the money you can in campaigns that are profitable over time, that is coming to have a ROI of 100%.