Return on Investment (ROI) which is most closely associated with the worlds of finance and investment. In the case of marketing, ROI essentially appraises the relative gain – in terms of profit gleaned (or costs saved) – which is gained by undertaking a marketing campaign in comparison to the expenditure related to that campaign.
ROI and Marketing
The above is a basic explanation of the general concept of ROI but as is often the case, in reality things aren’t quite as simple. When it comes to the ROI delivered by marketing activities, it is crucial to first understand that there are many factors which must be considered on both the expenditure and return sides of the equation. Costs associated with marketing activities after all, come in a number of shapes and sizes:
- Creative costs – Expenditure devoted to generating marketing ideas, developing brand identities and deciding and implementing campaign strategy.
- Practical costs – Investment in the physical creation and dissemination of marketing materials, the salaries of those involved in such processes and other similar day-to-day expenditures related to marketing activities.
- Subsidiary costs – Unforeseen expenses and costs related to marketing exploits or changes to business practices as a result of specific campaigns or general marketing advice.
Whilst this is indeed important to understand, and may seem to suggest that achieving good ROI from marketing activities could be more difficult than it first appears, it is even more crucial to realise the diverse and numerous forms which returns from marketing can also take:
- Immediate profits – This is the most obvious and commonly considered type of return gleaned by marketing, and is made up of the physical increases in sales or contracts won as a direct result of any marketing campaign.
- Future business – An unquestionably important aspect of the benefits wrought by marketing campaigns, the potential for future business from customers attracted by marketing activities is often overlooked by many when considering ROI. In a similar vein, recommendations and referrals generated by those new customers also count amongst the returns generated by marketing campaigns.
- Altered perceptions – In many cases, marketing activities may not be explicitly aimed at generating immediate sales but instead at changing people’s perceptions of a company or brand. It is difficult to measure but the future choices made by prospective customers based on their altered perceptions of the company or product can also contribute to the returns delivered by marketing expenditure.
If you want to learn more about marketing that really delivers, the team at Ketchup can help. Contact us today on 0330 088 9277, or complete our online enquiry form.