Cranial Interactive - Calculating ROI
There are two ways to move forward in calculating the ROI for your optimization project. How you do this is dependent on the degree of financial accountability you require.
The Simple ROI Model
The moment the project exceeds the goal you previously set out, you have achieved a simple return on investment. From there you can simply go backwards and divide the project budget against the total number of results required, to calculate a cost per conversion.
The Complex ROI Model
You need to ascribe a value (V) to each conversion, based on the conversion definition you have already created. This can be Net Profit on each purchase, a comparative value of customer acquisition costs, etc. this requires access to detailed marketing plans and financials.
Determine an acceptable return (R), where “R” = (X x Project Expense), and where “X” is the desired rate of return.
All of these may be arbitrary numbers, but if you are guided by solid research, they should provide sound framework.
Finally, R/V = N, where “N” is the traffic requirement for the project to reach the predetermined rate of return.
Back to Determining the Return
