Question

1. How do marketers measure return on marketing investment? Why is this figure difficult to assess?

Answer 1

To measure return on marketing investment marketers uses the basic formula which is

ROI= (Revenue from marketing campaign -cost of marketing campaign)/ (Cost of marketing campaign)

However, some companies deduct other expenses and use a formula like this:

ROI= (Profit – Marketing Investment – Overhead Allocation – Incremental Expenses)

There are some important factors which plays important roles in calculating ROI is

1. Total revenue: generated for a campaign (or gross receipts or turnover, depending on your organization type and location, which is simply the top line sales generated from the campaign)

2.Gross profit, or a gross profit estimate: which is revenue minus the cost of goods to produce/deliver a product or service. Many marketers simply use the company’s COG percentage (say 30%) and deduct it from the total revenue

3.Net profit: which is gross profit minus expenses

It is sometimes difficult to assess, because of the following reason :

because marketing efforts usually result to intangible benefits for employees and customers. Intangible benefits are those improvements that aren’t easily translated to monetary value such as:

1. Increased commitment and employee engagement

2. Reduced stress levels

3. Increased job satisfaction

4. Improved customer service