As a tool for financial decisions, Return on Investment or ROI is used to compare profitability or efficiency of various investments. It is usually expressed in percentage, the relationship between the investment and the profit. Many ROI solutions developed an application incorporating the ROI formula for different needs. For instance, in marketing management planning, there is an application called a marketing ROI calculator. There are also other calculators for ROI depending on the factor that needs to be incorporated, such as an ROI calculator used to compare the impact of taxes on investments.
A marketing ROI calculator compares the relationship between gross profit and marketing investments. This enables the business to determine and focus on marketing campaigns that provide the greatest results. It is also used to justify marketing expenses if they are necessary or such expense can be diminished. This is because, compared to operational or production cost, marketing budgets are often the first to be slashed out in the case of necessary cost-cutting.
Examples of marketing expenses are sales promotion, publicity materials, commissions, marketing services, newspaper ads, radio ads, television airtime ads, billboard ads, coupon developments, direct mails, brochures, pamphlets and other promotional items. In the implementation of these, sales and marketing salaries is also another expense. Marketing does not come cheap, so it is essential to determine the best marketing program to maximize the budget. For best results, some companies even employ marketing agencies who specializes in this field and is more knowledgeable and backed up with market research and surveys. Marketing is a necessary tool for any business as it directly relates to the sales of a product that translate to profit. Marketing also creates demographics and acts as a research that takes time and so much effort. Marketing also needs creativity to create an impact or appeal to the target market. Marketing is not an easy task to be undertaken and therefore needs investment.
All businesses, small or big, must invest in marketing to increase revenue. This also encourages and accelerate growth for the business. Thus, using a marketing ROI calculator is an important tool in the management of marketing expense to only spend on the marketing programs that yield results.