Return on investment (ROI) is a measure of performance which is used to calculate the efficiency of a business investment. It is therefore also helpful for comparing the efficiency of different investments and seeing which are successful and which are not. It can help many firms when deciding on budgets for different marketing techniques, especially for website marketing where the figure can clearly show which method has created the most traffic for the lowest cost.
For example, a company may wish to see if Pay Per Click (PPC) or SEO is the most efficient. They would first need to retrieve the number of visits each method has gained throughout a specific period of time and the cost of the service throughout this same time. The following formula can then be used to calculate ROI:
Sample
A firm invests £18,500 into Pay Per Click and receives 15,051 views. They also use SEO which brings 17,916 views to the website costing £9,400. The formula can now be used to calculate ROI, which in the case of website marketing is expressed as cost per visitor.
| PPC | SEO | |||
| cost per visitor | cost per visitor | |||
| 18500 | £1.23 | 9400 | £0.52 | |
| 15051 | 17916 |
These figures show that SEO is significantly more efficient as their cost per visitor is much lower than PPC. It would therefore be sensible for the business to amend their budgets in response to this and possibly invest more capital in SEO. This is likely to lead to an increased number of website visits which will bring many benefits to the business.
