You can consistently increase your company's ROI over time with small but impactful changes to your business operations. We've collected 5 strategies you can use to cut expenses and create more revenue, which translates to financial stability and growth for your business.
What Is ROI?
Return on investment (ROI) compares the amount you spend on a business endeavor to the resulting profit. This ratio illustrates whether an investment efficiently drives revenue for your business.
You can calculate the ROI of your entire business or track this metric for a specific program, initiative, or marketing campaign. The higher the ROI, the more money you're making for every dollar you invest.
Profit is the most common way to measure ROI, but you can also analyze the success of an investment based on how well it:
- Reduces overhead, production costs, and related expenses
- Builds awareness of and engagement with your brand
- Improves efficiency
- Boosts sales
- Enhances customer experience and satisfaction
How Do You Calculate ROI?
You can calculate the ROI of any business investment with this simple formula:
ROI = (revenue - expenses)/expenses
Let's say you run a marketing campaign that costs $1,000. It directly results in $5,000 in sales revenue.
($5,000 - $1,000)/$1,000
$4,000/$1,000 = 4
Finally, multiply by 100 to convert the ROI to a percentage - in this case, 400%.
5 Ways to Improve Your ROI
1. Take a Data-Driven Approach
Analyze available information about your customers so you can fulfill their needs. You can use countless sources of audience data to refine your offerings, such as:
- Comments and chatter about your brand on social media
- Surveys to ask current and prospective customer about their awareness of and relationship with your brand
- Journey maps that show how visitors navigate your site and how long they stay on each page
- Predictive analytics, which uses past events to determine future ones
- Touchpoint maps, which track each customer interaction with your brand
- Buying behavior such as average purchase value and frequency
Whether you rely on just one or multiple data sources, you'll develop insight about ways you can improve in the eyes of your customers. Removing sources of friction like limited payment methods or a clunky checkout can increase sales, boosting ROI.
2. See Where Spending Goes
Periodically review actual business expenses to see how they align with the budget. If projections don't accurately reflect spending, you can identify and address inefficient areas.
You can also compare revenue to expenses for each segment of your business to see which departments and initiatives create profit and where you spend more than you earn. These numbers can inform target areas for ROI improvement.
3. Set SMART Goals
Once you've identified areas where you can increase revenue or decrease spending, it's time to set goals for those initiatives. Your objectives should ideally be SMART, which means they're:
- Specific: For example, iInstead of "improve marketing ROI," you could aim to improve the ROI of your social media marketing channel by 25%.
- Measurable: Attach numbers to your goal so you can track progress over time.
- Achievable: You should write goals you can realistically achieve in a set timeframe.
- Relevant: Goals should represent small milestones that support your larger business objectives.
- Time-Bound: Set a deadline to achieve each goal, whether you're working on monthly projects or longer ROI improvement initiatives.
When you address one or two SMART goals at a time, you'll begin to see your ROI rise. Lack of focus makes it difficult to achieve results.
4. Personalize Promotional Efforts
Customers want to feel like you're speaking to them directly with your marketing materials. If they receive texts and emails that don't apply to their needs, they may be discouraged from shopping with your brand. Personalizing the content of customer touchpoints can increase sales by at least 10% and raise marketing ROI by up to 800%.
You can go beyond simply adding the person's first name by tracking their reactions to your campaigns and automating emails and other messages based on past behavior. For example, if a customer came back to an abandoned cart last month when you sent a promo code, you can trigger a similar incentive next time they browse and select products without buying.
5. Experiment with New Marketing Channels
You need to meet your customers where they spend time online. Since their preferences change over time, it makes sense to refresh your marketing channels to remove low performers and add new options every so often.
If you aren't sure where to start, choose just one unfamiliar medium and run an experiment. You can branch out to work with a brand ambassador, introduce a new customer loyalty program, or switch your paid ad campaign from one social site to another. Make sure you review the numbers so you can see how each new avenue affects ROI.
The Benefits of Working with Pay.com as Your Payment Service Provider
Pay.com offers an array of features that can improve your ROI. When you partner with us, you can:
- Accept multiple payment methods, increasing sales by addressing a common cause of cart abandonment
- Reduce friction that interrupts the checkout process and prevents conversion
- Avoid expenses associated with fraudulent transactions through 3D Secure 2.0 multi-factor authentication
- Build a customized checkout in minutes or use our advanced API to integrate our tools with your own website
- Let your customers know you comply with PCI DSS since we meet the highest level of these industry standards
We also have a fully transparent flat-fee structure, so you'll save on payment services without surprise charges and bills. It's fast and easy to get started.
Click here to sign up for Pay.com now!
The Bottom Line
Calculating ROI for operations, product launches, marketing campaigns and other aspects of your business informs smart spending decisions. You'll be able to reinvest profits toward initiatives that support sustainability and growth.
A better checkout process can have a big impact on your company's ROI, since nearly three-quarters of customers say they switch brands when it's too difficult to complete an online purchase. Pay.com gives you a full-service payment infrastructure with features to improve the user experience at checkout, resulting in higher conversion and enhanced customer loyalty.