ROI Analysis
[noun]
‘Return on Investment (ROI) Analysis’ is a key aspect within the n e t a suite of services for digitally centric omnichannel businesses and eCommerce, as well as for digitally transactional businesses – it is indeed one of the most recurrent terms in our n e t a – Speak/Glossary.
Broadly speaking, ROI analysis is a frequently used tool as it provides a direct and easy means to understand the measure of an investment and how it yields profitability. ROI is most definitely one of our favorite financial metrics for evaluating the overall economic consequences of the expenditures and actions a business would face throughout its life-span, and in our case specific to either digital marketing as an endowment or an eCommerce/digital channel’s P&L.
Moreover, this type of key metric is versatile, relatively simple in concept, and offers a rudimentary gauge of an investment’s profitability. ROI calculation also encourages a range of applications and actions, to constantly retool, fine tune and align a company or digital channel’s performance: indicators, such as the availability of opportunities with higher ROIs, or a mid-term assessment pointing out how an investment may not be yielding the bottom line results we had anticipated, guides our initiatives in order to enhance accelerated growth or reverse a negative trend, by quickly exposing the best alternatives to existing methods.
ROI Calculation Tips
The real challenge in calculating an ROI ratio % for any investment or action is knowing which costs and which return figures to use within the formula. A simple way to calculate this is to compare returns to costs by making a ratio between channel revenue and costs that would indicate an investment. The % calculates as net investment of all gains, which are then divided by total investment costs. The result is the simple ROI version of the cash flow metric for rating investments, business case results, and other actions.
Note that ROI calculations become meaningful only when both gains and costs are undoubtedly due to the action, and are not due in part to other causes. Through a fiscally sound approach, a thorough ad-to-sales-ratio analysis and mapping, and P&L reliant planning, n e t a is able to ensure alignment between specific returns (such as greater profits) with the specific costs attributed to generate revenues (such as the costs of digital marketing spend). This allows us to identify, track and build upon solid ROI metrics that can drive channel growth to unprecedented financial results.
ROI metrics and calculation are fundamental in all Strategies and services that neta develops, including Analytics Consulting, as well as, an on-going barometer for all marketing budgets and initiatives that we oversee. In fact, within most of our services, ROI calculation would more specifically allow us to identify a ratio, that we can then use to both compare net gains to expenses and to plan an efficient way forward, that meets and exceeds our clients’ expectations in terms of returns and overall KPI‘s achieved.
Additionally, ROI is one of the key metrics we would evaluate to measure the success not only of our website platforms from a build perspective, but post launch as we market our client’s digital assets. For instance, from an analysis standpoint we would use these metrics in analytics consulting in several different ways to gauge the profitability: ROI can be applied within a marketing budget (or marketing P&L); it could also be used as a measure of inventory investment, or to gain an understanding of CapEx return which means the investment within the re-design and programming of a digital platform over time.
Assessing the return of investment is also the most common profitability ratio within our Performance Management service, and in this case as well, it is most commonly expressed as a percentage: ROI at its highest level deals with the money invested into a company and the return realized on that money based on the net profit or EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization).
Top 4 Services that Generate ROI
- Omnichannel Strategy: building a seamless consumer journey across all touch-points ensures a happy, loyal and returning customer, maximizing the investment and driving conversions across all transactional channels
- UX Design: aesthetically driven and thought through digital platforms, built upon a solid user experience analysis, that hooks online visitors, and captures their attention at the beginning of the conversion funnel.
- Content Creation: content that allows brands/products/services to express and share their full potential, their vision and their mission. Investing in quality, strategy-led insights that drive content creation generating maximum results.
- SEO: when SEO is a forethought and not an afterthought, it can prove to be crucial in driving cost-efficient conversions. In our experience, it is through SEO as a digital traffic channel that we can actually generate the highest long-term ROI.
If it might be more obvious to associate revenue of investments analysis with finance and performance, it is a little less standard to highlight how ROI is achievable through design and content creation inversely. However, using design to build engaging and striking visual displays that leverage content creation strategically, has allowed us to uphold key brand objectives such as ensuring a dynamic, informative and content-rich consumer journey to the end-users of a product or service.
More often than not, we’ve achieved this through an omnichannel approach mixed with a solid SEO strategy, where we’ve been able to drive higher returns than every single prior SEO partner whom we’ve replaced.
ROI
Return on investment is a purely financial term, used to measure and validate the success (or lack) of any type of investment, from product launch to marketing and acquisition strategy design and implementation. ROI offers a cost-benefit analysis which compares different investments or initiatives, and to ultimately identifies whether the investment has been effective, from a monetary perspective.
SROI
On the other hand, social return on investment (SROI) is used to evaluate the general progress of certain developments, showing both the financial and social impact of a corporation. In fact, with this type of analysis the measuring would extend to values that are not traditionally reflected in financial statements, including social, economic and environmental factors, which can identify how effectively an company is using capital and resources to achieve value for the community and/or to address global issues such as those outlined by the United Nations in their SDGs. This might be a different kind of ‘brand-equity’ metric that is increasingly becoming more relevant for customer retention.
Our overarching ROI-driven approach towards all initiatives that we execute in partnership with our clients, aligned with corresponding results and accelerated KPI’s, has helped us strengthen our client’s brand perception and performance, leading them to becoming brand leaders, equipped with all the tools and knowledge they need to sustain and evolve their enhanced digital marketing. We acquired this by optimizing our client’s return on investment to the maximum.
Among the results that we’re most proud of, are the accomplishments we brought to our client Newport Academy, where there has been unprecedented topside growth, coupled with leading industry awards including the W3 Gold Design Award for best Health Services, and the achievement of #1 Google (SEO) ranking for the word “teen rehab” (among the most competitive and cost-effective term in the teen treatment space).
This is a perfect example of high long-term ROI that was #designedbyneta.
