Return on investment (ROI) is a ratio between the net profit and cost of acquisition. As a performance measure, ROI is used to evaluate an investment’s quality or compare several different investments’ efficiencies.
Digital marketing AdWords decisions have an obvious connection to the profits, and many marketing managers find “return on investment” a useful metric. However, marketers and PPC campaign management services should understand the full extent of the return and the investment parts of the equation for AdWords marketing campaign.
Indeed, the equation is straightforward:
ROI = Net income / Investment
ROI = (revenue − the cost of goods sold) / cost of goods sold.
But when considering digital advertising for eCommerce marketing, the calculation may be a little more complicated. For example, companies may consider long-lasting brand recognition and improved SEO to return on digital marketing AdWords investment even though hard to measure directly. For example, a successful paid-search campaign with help from PPC campaign management services or AdWords management services may elevate SEO, direct traffic, and the AdWords marketing campaign effect will last longer than the actual campaign duration. In such a case, proper ROI measurement would need to consider calculating the numerator (net income) over a more extended period. The resulting ROI would be higher than a simple computation would show.