Return On Investment


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Return on Investment or simply ROI is the calculation of the profit earned on investment. The formula to calculate ROI is as follows −

ROI =
Return − Investment / Investment

To understand the ROI from Mobile Marketing, let’s assume −

  • Customer Lifetime Value (CLV)

    CLV = Avg. Revenue per customer × Avg. No. of visits

    Say, $100 per customer × 10 visits = $1,000

  • Calculate allowable Cost of Customer Acquisition (COCA) as −

    COCA = CLV × (% allocated to new customer)

    Say, $1000 × 10% = $100

Now, reallocate your mobile marketing budget by dividing them into ‘Branding’ and ‘Direct Response’. For example, allocate 20% of your budget to direct response −

Say, direct response budget = $200,000

20% of $200,000 = $40,000

Hence, mobile marketing budget is $40,000.

Now, calculate the number of estimated customers from new mobile marketing campaign.

CLV= $1,000

Budget= $200,000

COCA= $100

Customers acquisition = budget ÷ COCA

Hence, $200,000 ÷ 100 = 2,000

Therefore, new customers = 2,000

Direct response (of new customers) = 2,000

Mobile marketing new customers = 400

Conclusion − On 20% investment, you will gain 20% new customers.



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