Return on Investment, or ROI, is a parameter we use to measure the profitability and effectiveness of our campaigns . It's used in both the investment and marketing worlds to quantitatively determine whether our actions have been profitable and lucrative.

By measuring the ROI of different actions, we will have the basis for making better decisions regarding the company, since this index allows us to determine whether we are obtaining profits or losses in each individual action.

Before calculating ROI, we must be clear about the campaign's objective, as the elements needed to calculate it will depend on this. For example, if our objective is revenue, the figures we need to consider are easy to find; whereas if our objective is leads, we must assign a financial value to each lead in order to perform the calculations.

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The ROI formula

The ROI formula is as follows: ROI = (PROFIT – INVESTMENT) / INVESTMENT*100

The investment we include must be the total, taking into account not only the money invested directly in the action (for example, in Facebook Ads), but also the labor we must pay to carry out these campaigns, if applicable.

Let's take the following example: with a Facebook Ads campaign, we generated €2,500 in revenue, a figure we obtained after analyzing purchases from this source. Let's imagine we invested €600 in Facebook, but we also had to pay €250 to a professional Social Media Manager to implement our campaign.

In this case, it would be: 2,500- (600+250)/(600+250)= 1.94

To see it more clearly, we multiply by 100, so the ROI (i.e. return on investment) would be 194%.

If the values ​​indicate a 0% ROI, it means you've earned the same amount as you invested. If the ROI were negative, it would mean you're losing money.

ROI is a very valuable indicator, but it has some flaws. Not including the time variable in its formula can lead to a misperception of profitability, as a 194% ROI in a few months is not the same as a 194% ROI in a few years.

Furthermore, we can encounter many difficulties when measuring the ROI of branding campaigns , as the results are difficult to quantify. In this case, we will have to resort to KPIs or key performance indicators that can provide us with figures. For example, some KPIs to measure the ROI of a marketing campaign could be the increase in mentions on social media or the increase in brand searches on Google.