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What is ROI and how important is it for my company?

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Finally in 2016, after a long wait, many fans were able to watch the epic battle between the man-bat and the man of steel in Batman v Superman: Dawn of Justice, a production that has earned more than 870 million dollars around the world. .

An amount that, at first, seems to be quite high, was actually considered a big failure, since only the marketing of the film spent almost a third of that amount to try to attract fans, not to mention the cost of production, which was also very high. That is: the ROI of this Hollywood product was not the best. But what is ROI?

In brief, ROI is a calculation produced to point out if your company is really making money with every investment spent. A calculation that, let’s be honest, every business should do, right? But not to be just in the summary, how about delving a little deeper into the subject to understand what this ROI is and what this acronym means? Come on!

What is ROI and what is its role in marketing?

For starters, you need to understand what this acronym means: ROI. Well, the acronym refers to Return on Investment, or Return on Investment, in Portuguese. It is the return that indicates whether a given investment (in personnel, website optimization and even in the acquisition of new stores) has actually generated some financial return or if it is, in fact, consuming business assets. Something that is different from ROMI (Return on Marketing Investment), another term that refers only to the investment made in marketing by a brand.

But how to calculate the ROI to know if an investment is performing well or poorly?

How to calculate ROI?

It doesn’t take a math whiz to know how to calculate ROI. See how simple it is.

Let’s assume that you, in that month, had a return of BRL 100,000 with your business and an investment of BRL 15,000 in the same period. With these numbers, the account would look like this (100,000-15,000) / 15000 x 100, which would give 566. In other words, your ROI this month was 566%.

Another very important point in this whole account is knowing not only how much is spent to win a customer — the famous CACor Customer Acquisition Cost — but also how much is spent to maintain it.

What is a customer lifecycle spend (LTV)?

Well, as we’re talking about investment, it’s good to keep in mind that it’s not enough to just win a customer, you have to keep them by your side, right? Therefore, it is always important to also separate an amount that will be spent to keep that person next to the brand – with items such as content generation, for example. A sum that we usually put within the metric of Lifetime value (from the acronym LTV), or, in Portuguese, customer lifetime value.

As you have seen here, ROI is an important tool to show what the return your investments are actually giving to your business. A tool that can point out both the success and failure of a company in the market. So, now that you know what ROI is, no more thinking that big successes are only made with big numbers, right?

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