What is ROI?
ROI is an abbreviation for "Return on Investment" and expresses how much you get out of an investment. In other words, ROI is about measuring your revenue against your costs. An ROI of 100% means you have made a 100% profit on your investment.
ROI is also frequently used in the context of marketing to describe how good a return you are getting on your marketing efforts. It is closely related to the concept of ROAS.
How do you calculate ROI?
ROI is calculated by measuring profit against the investment amount — for example, sales generated by specific marketing campaigns relative to the costs associated with them.
Formula for calculating ROI:
ROI = (Profit - Investment) / Investment x 100
An example of an ROI calculation: say you have spent 10,000 DKK on advertising on social media. This has generated a profit of 100,000 DKK:
ROI: (100,000 - 10,000) / 10,000 x 100 = 900%
This means that the marketing campaign gives you a 900% return on your money.
TIP:
You can often find your ROI/ROAS directly within the individual advertising tools.
When is an ROI good?
As soon as your ROI is positive, you are making money on your investment, and it can broadly be said to be beneficial.
If your ROI is negative, on the other hand, you are losing money on your investment and it should not be made.
What constitutes a good ROI more precisely depends on the individual investment, the risk involved, the time horizon, and other factors.
Do you want to optimise your ROI?
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