Return on Investment (ROI) is a key measure that enables businesses to assess the effectiveness of their investments and make well-informed decisions. Companies can identify the profitability of different initiatives, projects, or investments by calculating return on investment (ROI). In this article, we offer some practical examples of ROI from various different contexts, in order to show how businesses can effectively use this metric.
Example 1: Marketing Campaign
Let’s say a company spends $10,000 on a digital marketing campaign to boost sales in this ROI examples. Over the three months of the campaign this results in $50,000 extra revenue. To calculate the ROI, follow the following steps:
Net Profit = Total Revenue − Other Investments =$50,000 – $10,000= $40,000
To calculate the ROI, you would use the following formula: (Net Profit / Total Investment) x 100 — In this case, it would be: ($40,000 / $10,000) x 100 = 400%
In this case, the marketing campaign produced at 400% of ROI, meaning the investment was profitable for sales.
Example 2: Staff training program
An organization pays $15,00000 for a training course for its employees to increase productivity and happiness on the job. Within three months of the program implementation, the company sees a 20% increase in productivity which represents another $60,000 (YOY) income for the following year.
Net Profit = Total Revenue – Total Investment = $60,000 – $15,000 = $45,000
Calculate ROI: (Net Profit / Total Investment) x 100 = ($45,000 / $15,000) x 100 = 300%
In this case, return on investment (ROI) from the employee training program was measured at 300%, showing that investing in workforce development pays great dividends.
Example 3: The Case of a New Software Implementation
A company chooses to invest $25,000 in new project management software to improve efficiency and enhance employee collaboration. The effort has cut project completion time and saves about $75,000 a year, the company says.
Net Profit = Annual Savings – Total Investment = $75,000 – $25,000 = $50,000
Calculating ROI: (Net Profit / Total Investment) x 100 = (50,000 / 25000) x 100 = 200%
(Technologysolutions, 2017) “During the follow-up usage, the new software had a 200% ROI.
The Bottom Line
These examples of ROI provide a snapshot into how companies can utilize this metric to evaluate the success of different types of investments regarding marketing, employee training, and technology implementation. When organizations understand and calculate ROI to make the data-driven decisions that increase profitability and grow their organizations. Whether being used to assess marketing strategies or operational improvements, measuring ROI is necessary to confirm resources are effectively allocated and investments are producing positive returns.
