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Understand the relationship between ROI and Digital Marketing

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What will be the best strategy for companies: investing in Facebook Ads or Google Adwords campaigns? Focus on Instagram Ads or create a search ad? These doubts are very common among marketing managers, especially in companies that do not have a large budget. To answer them, it is necessary to know the relationship between ROI and Digital Marketing.

At the digital environment there are many options and features, but no use taking actions without evaluating the results. Therefore, we will show you how to use this important KPI in your strategies. Check out!

After all, what is ROI?

ROI, or Return On Investment, in English, represents exactly the return obtained from an investment. This performance indicator is fundamental for any action that your company invests, since, with it, you have proof that it was profitable or not.

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O ROI calculation It’s simple. For this, it is enough to add the investments made in the action, such as the salary of those involved, purchase of software, promotion of campaigns or whatever else is related, in addition to know the return generated from this work.

So we apply the formula:

ROI = [ (retorno – investimento) / retorno ] x 100

What is the importance of relating ROI and Digital Marketing?

Once you already know the concept, now it’s time to understand the relationship between ROI and Digital Marketing. For this, it is necessary to understand that, on the internet, there are several possible actions, such as investment in social networks, Google Adwords, email marketing, marketing automation, among others.

However, if you simply draw up a plan with several simultaneous campaigns and don’t measure the result of eachthey can camouflage themselves, hiding the ones that don’t generate results and limiting the budget to the ones that could really stand out.

Therefore, the right thing is to apply the ROI in all actions taken by the marketing team. That way you can compare strategies and optimize what is most interesting.

Let’s create an example to make it clearer: imagine that your company has a limited budget and, today, you have R$ 1,000.00 to apply to marketing strategies. So you decide to apply R$400.00 to a Facebook Ads campaign and the remaining R$600.00 to a Google Display campaign.

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After one month of the investment, you noticed that 20 sales were generated from the Facebook and 30 came from Google. Now we need know which of the two actions was more profitable.

For the calculation, let’s define that the average sales ticket was R$50.00. With this, we found that the return on Facebook was R$1,000.00 and on Google it was R$1,500.00.

Now, let’s apply this data to the ROI calculation:

Facebook Ads: ROI = (1,000 – 400) / 400 = 1.5 = 150%

Google: ROI = (1,500 – 600) / 600 = 1.5 = 150%

Analyzing the numbers, we saw that the two strategies in this example performed the same! The amount applied to Google was higher, but the return also followed the proportion.

Of course, we are talking about an example, created just to make the concepts clear. The important thing is that you understand the need to always associate ROI and Digital Marketing evaluating their actions and better investing your investments.

Want help to start better controlling your investments? Discover our spreadsheet!

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