What do you get when you add Marketing to ROI (Return on Investment)? The answer is not as straight forward as you might think. The best way to explain this is by an example as follows:
The Marketing Department puts forth a campaign with a cost of $10,000. The new revenue that the campaign brings in is $20,000. As first glance, one might say that the Marketing Department doubled their money and that the campaign was very successful.
Let’s look at this a little different for a minute. If the company has a profit margin of 50%, that would mean that the remaining 50% relates to the cost of the product. In this case, that would make it $10,000. (50% of $20,000)
The results are as follows:
Marketing campaign $20,000 Revenue
Subtract:
| Campaign costs of | $10,000 |
| Product costs of | $10,000 |
| Combined Cost | $20,000 |
The resulting Marketing ROI is $0
In this case, the Marketing ROI is zero. Not the result that we anticipated.
The conclusion here is that one needs to take great care into choosing the correct marketing campaign will result in a positive Marketing ROI. Good planning everyone