In online marketing, Return On Investment refers to the concept that online advertising is an investment from which a marketing professional expects to, at some point, see a return; usually in the form of increased revenues, or additional Orders.
A marketing professional is working for a site which sells specialty dog food.
|dog food delivery||$1.99|
Within a single day, they receive 100 clicks on each keyword, at a total cost of:
(1.50 + 1.75 + 1.99) x 100 = $524.00
For their 300 clicks, they receive 15 orders for a total of $900.00 in revenue. If their profit margin is 75%, then their total revenues are
$900.00 x 75% = $675.00
$675.00 - $524.00 = $151.00
Which, as a percentage of spend, is:
$151.00 ÷ $524.00 = 29%
With Conversion Tracking, we are able to determine the following additional information:
|Keyword||Amount||Clicks||Total Cost||Orders||Order Totals||Net Profit||ROI|
|dog food delivery||$1.99||$199.00||4||$240||$180||-$19|
The only term which offers a positive Return on Investment is dog food. The other terms cost too much in our scenario and are not worth the marketing dollars.
The options for remedying this are: