ROI (return on investment) is defined as the value realized or financial return on every dollar spent - revenue generated minus economic cost. The financial terms typically include the calculation of how much revenue is generated, how much profit is achieved or the cost saving realized as a result of the investment. While an ROI calculation is typically used to demonstrate value generated, it is sometimes used along with other approaches to develop a business case for a given proposal.
In an over-simplified nutshell, ROI is calculated by dividing the revenue and/or profits attributable to a marketing activity by the cost of that activity. Using industry benchmarks (published annually by the AMA, DMA, Marketing Sherpa, Marketing Profs), Protocol helps clients project return on investment at the onset of a program, campaign or project. Then we work with our clients to establish a centralized marketing database that is tightly integrated with their web site as well as their SFA/CRM tool (or whatever feedback reporting tool they use) while also implementing various best practices intended to bridge the gap between marketing and sales. We help clients close the feedback loop, measure and analyze results then calculate ROI with the goal of demonstrating marketing’s value while illustrating marketing’s impact on revenue generation.
Here is an example of marketing activities and their ROI by total marketing budget and by marketing tactic or media:
Final word of caution: business-to-business marketers that experience the complex sale (multiple decision makers, complex product/service/solution, lengthy buying process), calculating ROI requires serious consideration of the length sales cycle.
Download roi_by_marketing_tactic.xls
Here is an example of marketing activities and their ROI by total marketing budget and by marketing campaign:
