Know How, Know How Featured

What is ROI?

Have you ever considering measuring and improving your ROI through Customer Experience?

As experts in customer experience, we understand that ROI is essential to every investment a business can make, especially when it comes to marketing and consultancy.

Return on Investment (ROI) is one of the most common profitability ratios, and is used to measure the gain or loss made on an investment, relative to the amount of money that has been invested. The use of ROI in business involves observing how money has been invested in a company and the return that is realised based on the net profit of the business.

How do you calculate ROI?
ROI calculation is based on percentage, as this is how the return on investment is most typically expressed. The most common formula used for working out ROI is:

ROI = (Net Profit/ Cost of Investment) x 100%

This calculation is flexible and can be adjusted for different uses. To give an example of a return on marketing investment, imagine a company that averages 4% organic sales growth and runs a £10,000 campaign for a month. They have a sales growth of £15,000 that month. The calculation would look like this:

Return on Marketing Investment = [(£15,000 – £10,000)/ £10,000)] x 100

= 50%

By using this calculation a business can clearly determine how much return they have gained by their investment of £10,000. In this case, they are £5000 in profit.

What are the benefits of using the ROI formula?
There are some advantages which make ROI percentages useful, as well as the formula used to calculate them. The first of these is that percentages are more often thought of as being easier to read and understand than ratios. The formula is considered extremely easy to calculate as well, because there is no set definition of what “return” signifies and can, therefore, be used as you or the company investing sees fit.

The notion of return on investment is also generally considered to be a universal concept, so if you use this formula, it is most likely that others will know what you are referring to. This will also allow for comparisons between investing in a new office, or if a new member joins your team.

If you would like to read more on this, the full article can be seen here: https://www.insight6.com/what-is-roi/

Thank you for your time in reading this article. If you would like to speak to me my contact details are below.

Ian.

Phone: 07891 631869
Email: [email protected]

You Might Also Like

Leave a Reply