Admin at 02:31, 30 September 2009

2009-09-30T02:31:18Z

Admin: Created page with '''Acronym:'' ROI In online marketing, Return On Investment refers to the concept that online advertising is an investment from which a marketing professional expects...'

2009-03-10T20:51:46Z

Created page with '''Acronym:'' ROI In online marketing, Return On Investment refers to the concept that online advertising is an investment from which a marketing professional expects...'

New page

''Acronym:'' [[ROI]]

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]].

=Example=
A [[marketing professional]] is working for a site which sells specialty '''dog food'''.

Using [[Google Adwords]] and [[Yahoo! Search Marketing]] to set up campaigns for [[keywords]] related to '''dog food''', our marketer bids:
{|
! Keyword
! Amount
|-
|dog food || $1.50
|-
|dog chow || $1.75
|-
|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

At $524.00 in [[marketing dollars]] and $675 in [[net revenues]], their return on investment is

$675.00 - $524.00 = $151.00

Which, as a percentage of spend, is:

$151.00 ÷ $524.00 = 29%

Where [http://www.conversionruler.com/?_cr=web|wiki|term|Return+on+Investment Conversion Tracking] solutions come into play is in determining which [[marketing dollars]] are wasted.

=Conversion Tracking=
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 || $1.50 || 100 || $150.00 || 8 || $480 || $360 || $210
|-
|dog chow || $1.75 || 100 || $175.00 || 3 || $180 || $135 || -$40
|-
|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:
* Eliminate the unprofitable [[keyword]]s from the [[campaign]]
* Reduce the [[bid amount]] to a lower number to reduce the cost of the [[keyword]]s
* Optimize the web site in order to increase the [[conversion rate]] of the unprofitable keywords

← Older revision		Revision as of 02:31, 30 September 2009
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	* Reduce the [[bid amount]] to a lower number to reduce the cost of the [[keyword]]s		* Reduce the [[bid amount]] to a lower number to reduce the cost of the [[keyword]]s
	* Optimize the web site in order to increase the [[conversion rate]] of the unprofitable keywords		* Optimize the web site in order to increase the [[conversion rate]] of the unprofitable keywords
		+
		+	[[Category:Glossary]]

Return On Investment - Revision history

Admin at 02:31, 30 September 2009

Admin: Created page with '''Acronym:'' ROI In online marketing, Return On Investment refers to the concept that online advertising is an investment from which a marketing professional expects...'