Everyone expects good returns on their hard-earned money. And rightfully so. If a business cannot churn out the promised gains, it may be causing losses. But what is this return that you should receive on every investment?

Let’s take a look.

What Is Return On Investment?

ROI is the approximate profitability ratio of an investment. It is depicted as a percentage for easy comprehension.

Return on Investment (ROI) has various use cases. It tells you how a particular investment, for example, in a stock or a real estate transaction, performs. Furthermore, it also guides you on whether you should invest your money in a specific business.

How To Calculate Return On Investment

If the Return on Investment is positive, your efforts are raking in good profit. Conversely, a negative figure indicates losses incurred despite the money you pumped in.

You can calculate this number through the Return on Investment formula:

Where the net return on investment is the net revenue calculated as follows:

(Final Investment Value – Initial Investment Value)

For example, say you invested SAR10,000 in a business and SAR5,000 in hiring employees. Your total investment cost would be SAR15,000. If this business brings in a revenue of SAR30,000, then your net return or profit would be

30,000 – 15,000 = 15,000

Now your ROI would be

ROI = [15,000 / 15,000] x 100

    = 100%

A 100% ROI means that your investment is paying off twice the invested amount.

Significance Of Return On Investment

A Yardstick Of Business Profitability

This ratio of returns vs costs shows how profitable a business or an investment is. For an eCommerce business, it tells how much you earned and what customer value you created for every penny spent on the marketing efforts.

Easy To Calculate

Evaluating the ROI is no rocket science and does not require elaborate calculations. You can figure out the ROI through the basic returns from your business and the overall costs incurred.

Shows The Comparison

The Return on Investment formula enables comparison between the investment returns between different product verticals of an organisation and even the different brands of an organisation. Keeping a tab on the ROI can also help you compare the returns on different marketing campaigns for your eCommerce website.

A Performance Measure

A good ROI shows the efficacy of other performance metrics like asset utilisation, marketing activities, and cost management, including the sales price.

Impact Of Calculating The ROI On The eCommerce Industry

Expand Your Business

ROI works like a performance metric, thus helping you understand your business and the influence of your decisions. Knowing what works better enables you to grow your eCommerce enterprise in various ways.

Map Marketing Campaign Success

You can evaluate which marketing campaign was the most successful for your company, repeat those success stories, or just learn from the mistakes. In addition, it allows you to gauge which marketing plans worked the best.

Test New Marketing Channels

Different advertising channels find their way into your marketing strategies. When you know which channel is churning out the most profit, you can choose to invest more there. You can create ROI benchmarks and evaluate the results of all channels accordingly. You can test new channels and change the old ones per the metric analysis.

Growing Your Return On Investment In The eCommerce Industry

The eCommerce industry spends the most on marketing and promotional activities. That’s why their advertising ROI matters a lot.

An eCommerce company focuses on the number of orders and customers besides the revenue figures. They also monitor the website analytics to gain in-depth knowledge about their audience and their reactions to the marketing campaigns.

You will want it to grow well if you invest much in nurturing your eCommerce business. There are various ways you can maintain and increase ROI for your eCommerce company.

Read on.

Engaging Content

An eCommerce business thrives on good content. So engaging in substance draws more attention on the internet. And now, you don’t need to rely on just one type of content or one medium. Instead, you can create videos, podcasts, Instagram Reels, or go Live on YouTube with an influencer to talk about your product or a topic that matters to your brand.

Be assured that the superior content will draw more footfalls to your doorstep, thus enhancing your profitability and churning a higher return on investment.

Analyse And Utilise The Data

Conduct many A/B testing to generate as many strategies for your marketing efforts. And then use that data extensively. Rely more on information than any other source.

Your website dashboard, web, and Google Analytics can churn out enough data to understand your investments’ profitability quotient. Your ROI depends on customer engagement, so you must collect quality data on the audience.

You can evaluate the below parameters for customer insights:

–          What device do they use while shopping on your website? Do they mostly use a mobile, tablet, or laptop?

–          What are their likes and preferences? How often do they abandon the cart?

–          Which payment mode do they use? How many of your customers utilise the COD option?

–          Where are they based? How many international customers do you have, and from which country?

Improve Your Sales Leads

A higher number of quality leads churn out higher sales numbers. Your social media campaigns may be drawing a lot of attention. But not every customer who hits the heart on your post purchases on your eCommerce website. You must take them through the sales funnel stages to convert them to a customer who purchases from you repeatedly.

Map out the content for each stage of the customer lifecycle and draw them in. Then, once you know your audience, invent ways to reach them organically. For example, you can connect with them via personal social media messages, target them through paid ads, or send them customised offers via email and personalised newsletters.

Nurture loyal customers who give you repeat sales. You can pull in more crowds through customised email lists and newsletters. Moreover, utilise the User Generated Content on social media to capture your audience’s mindset and generate content that grabs their attention and forges a deeper bond.

Try New and Optimised Avenues

This refers to new campaigns on new social media channels and optimising your website pages. For instance, Instagram has emerged as the go-to place for every business. Your presence on this platform is critical to take advantage of the features like reels and stories and connect with your clientele personally. In addition, you can offer the Instagram audience special platform-specific discounts and offers.

Moreover, you must optimise your website landing pages for better performance. Most customers leave your eCommerce website or go to a competitor’s if your pages don’t load quickly. You can

–          Check and improve the site speed regularly

–          Ensure the payment gateways work well

–          Use simpler layouts for easy loading

–          Remove unwanted content and highlight the offers that lure the customers.

At The End

Evaluating the ROI is as important as knowing how to maintain and grow it. An eCommerce business is challenging to run because of the enhanced geographical reach, and the product range one needs to offer to lure customers. These four hacks can help polish your investment and make the returns shine.