What is ROI? How to calculate ROI in SEO, Content and Marketing? Being evaluated is an extremely important calculation in business.
But contrary to what many people think, ROI is not only for the world’s leading companies or market experts in the commercial market, but it can be applied to everyone as well as all sectors.
In the simplest terms – ROI is a measure of the success of a project. Let’s learn more about ROI with Ola City through this article!
I. What is ROI?
ROI is an acronym for Return on Investment. As a general definition, ROI is the ratio of net return to total investment costs. In economics, especially in business operations, ROI is understood as the result that indicates the return on investment activity.
To explain further for those who do not understand, “Net Profit” is your actual profit after deducting all expenses and deducting taxes. The biggest difference when talking about Gross Profit and Net Profit is the most obvious tax aspect.
When implementing business goals, companies often use the ROI formula to measure the return on investment that the business will achieve or have achieved. In the field of Marketing, when investing a sum of money in SEO or Content, businesses will use the ROI formula to measure the effect that will be achieved from this investment.
The formula for calculating ROI commonly used by businesses is:
ROI = (Net Profit / Investment Cost) x 100 or ROI = Return on Investment / Investment Basis.
Example: You invest $10,000 to buy shares and then earn $100,000 from selling the shares you bought, then the rate of return (ROI) of this investment is 900%.
This is the most common and easy to understand ROI calculation. However, in practice, when implementing this formula, there are a few requirements to keep in mind:
- When a report is received regarding an ROI conclusion, the person making the conclusion should be asked to describe in great detail the components used for the measurement.
- In fact, the simplest way to remember the ROI formula is to divide the profit by the cost of the investment.
II. How to calculate effective ROI in SEO, Marketing?
After learning the general definitions of ROI, there will surely be many SEOers wondering how to apply this formula effectively. Here, I will show you how to use the ROI formula in Marketing, Content Marketing, and SEO effectively.
How to calculate ROI in Marketing?
There are different formulas for calculating ROI in Marketing. However, the common formula that is being used by many experts is:
- Marketing ROI = (Profit – Cost) / Cost
To make it easier to use, let’s take a look at the following example:
If you make $100,000 from $1,000, your return (ROI) is 0.99 or 99%. ROI is often used to evaluate and verify business strategy in general, including advertising and Digital Marketing strategies.
We can calculate by ROAS – return on ad spend. This is also a similar metric to ROI, but it focuses more on specific tactics and strategies. For example, an individual advertising campaign. In other words, ROI is a metric that is calculated by the net profit over a certain period of time to give the cost of an investment, which is then multiplied by 100 to express the percentage as a percentage. The equation for ROI is as follows:
- ROI = (Net Profit / Investment) x 100
The value of net profit should be derived from your company’s financial statements, profit and loss (P&L), on the books.
III. Why is ROI important?
Mastering ROI calculations can help you understand how direct investments contribute to a business. This is the optimal method to evaluate your decisions and plans in the past, from which to learn from and develop future projects. Besides, you can also use the ROI calculation formula to compare and pursue business opportunities.
If the investment project in a certain area helps to bring high net profit, you should focus more time and resources on this project. On the contrary, you should change your investment direction when you realize that your projects bring in low returns or worse, no profits.
IV. Challenges to determining ROI
It’s not always easy and straightforward to calculate ROI. Before making an investment, it is necessary to make specific and detailed plans. Besides, should calculate the payback period relatively. At the same time, it is necessary to consider carefully to choose the implementation of the feasible plans, earning the most profits. Thus, the new investment costs are not meaningless.
Although it is difficult to determine the ROI for a particular investment. ROI metrics are also not necessarily meaningless when it comes to helping you calculate the cost of money and the amount of money received.
However, it should be noted that this method is only relative. Therefore, the accuracy of ROI results should not be absolute. Instead, consider combining ROI with other risk management plans for the investment project.
V. How to increase ROI
As can be seen, increasing ROI is very important. Especially for marketing related strategies. After learning about the role of ROI, in this section, we will support a few methods to increase effective ROI for Content Marketing strategy.
1. Know your market
Interacting and taking care of potential customers is considered one of the methods to increase ROI in effective Content Marketing. Resources and investment costs will help your products reach more deeply to potential customers.
Helping customers identify the brand will also be more convenient. When investing costs in Content Marketing, the business has increased its popularity in the market. This is shown through the number of people who subscribe to your news or sign up for membership. These will be the people most likely to buy.
2. Analyze your friends
Currently, social networking sites and technology information platforms are exploding in popularity. This seems to be a new trend of modern customers. Therefore, spending on media is an effective method of increasing ROI.
When considering an investment, consider using an external platform or software to analyze your customers. Pay attention to the reporting metrics that various support tools provide. Metrics such as: website traffic; The number of shares of Vietnamese articles, the number of loyal customers will bring benefits to your Content Marketing strategy, and help investors measure the success of the project.
3. Ready for testing
Before proceeding with a project, you should do a test before the actual practice. This will help you to limit the visibility of risks while running the project. This is a very important issue in the Content Marketing plan. So, don’t hesitate to experiment with your project first.
In addition, detailed monitoring records should be established. This stage will help you check and consider whether to expand the investment costs or not. When performing a mature ROI measurement, investors will easily have an overview related to their projects. From there, bringing accuracy and efficiency in investment decisions.
Increasing ROI is a complex and resource-intensive method. However, ROI metrics are one of the essential tools for business owners to get the most out of their capital.
VI. When to measure SEO ROI?
There are bound to be a lot of questions about measuring ROI. But perhaps of most interest is, when should SEO ROI be measured? As we all know, SEO is a long-term strategy.
And of course it also takes time to wait to produce results. So you will have to measure ROI for SEO by month, quarter, and year. In fact, in the first six months you will see no change, more precisely no effect. However, after this difficult period is the time to reap the rewards, because SEO can be profitable and continue to increase. So try your best, it’s a bit difficult but it’s fun.
VII. What is a good SEO ROI?
What is a good SEO ROI? Depends on what? The answer lies in your business. Because the nature of each business is different, the ROI is also different. Some stats that can be very good can also be extremely difficult. In addition, due to the investment budget for your business, a business that invests in SEO $20,000 per month will be very different from a business that invests in SEO $40,000 a month.
And to understand how ROI is, you must first set a goal. Think about your ideal ROI before starting to SEO your website. For best results, start with a small percentage, then increase gradually. Once you have the results after data collection.
Surely after reading this article you have a better understanding of what ROI is and the importance of ROI for a business. Ola City hopes that you can easily apply ROI to evaluate the effectiveness of your investment, development and business strategy. Good luck!
Ola City Global