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ECOMMERCEGRAPHICS AND MARKETINGNEWSSAFETY

ROI: how to calculate it and what it is for your e-commerce

By 14 April 2022No Comments
ROI - copetina

The ROI, acronym for Return Of Investment, is a very important parameter for those who want to invest in the digital sector. This metric, in fact, is able to calculate precisely how much the capital invested in a given activity actually makes. 

In this article we will analyze the concept of Return on Investment, we will see how to calculate it and, above all, how to exploit it to grow your e-commerce business.

Managing an e-commerce website

Just as an "on-site" commercial activity requires to be managed under different aspects, from the economic one, to that of the customers (etc.), in the same way it is necessary to manage a site e-commerce

On the other hand a e-commerce is to all intents and purposes an online store and, as such, must be managed correctly, in order to offer products and services to customers and generate revenues. However, being a digital store, it is based on different dynamics than a physical store. The management of a e-commerce, in fact, it provides: 

  • website security: to allow its customers to make purchases safely;
  • rapid and continuous support: to guarantee assistance in case of problems, returns and / or questions and to keep the site updated and functioning; 
  • site content management: to attract the attention of potential customers and keep the product catalog updated;
  • the analysis of the investments made and the revenues obtained (ROI): to verify that the money spent ensures a profit. 

ROI - Return Of Investment

The ROI it is a datum that measures how much has been obtained, or how much it is possible to obtain, from an activity, net of the investment that has been made to carry it out. 

In the field of marketing, the ROI plays a very important role because it is very useful to understand if you are spending your money profitably within your business, or it would be appropriate to use the budget in another way. 

How is it calculated?

To calculate the ROI there is a simple mathematical formula:

ROI calculation - 1

Let's take a simple example, to better understand what we are talking about. For the creation of your site e-commerce you invested € 1,000 and in the first year of business you obtained € 10,000 in revenues. Therefore the ROI it is obtained by dividing the net profit (10,000 - 2,000) by the invested capital (2,000). 

ROI calculation - 2

This means that for every euro invested, yours e-commerce got 4 euros in return: you earned 4 times the amount invested. 

However, many prefer to calculate the ROI as a percentage, using a variant of the formula expressed above: 

ROI calculation - 3

Applying this formula to our example, we get this: 

ROI calculation - 4

In summary, with an investment of € 2,000 and an annual income of € 10,000, you have earned 400% of the amount invested. 

How to increase the ROI of your business

To enhance the ROI of your e-commerce there are some simple and effective strategies and they are all based on the website management dynamics pitted above. Let's see them in detail. 

Website security

A secure website is essential to avoid a series of problems that could compromise site traffic, data (yours and users') and revenue. A possible cyber attack, in fact, risks causing the site to be shut down (which will be offline and cannot be visited), infecting the device of site visitors and the phenomenon of phishing (which affects your customers, who risk being stolen personal and compromising data).

Regardless of the type of hacker attack, a malfunction of the site risks generating distrust of your e-commerce and a consequent loss of traffic and ROI. To avoid these problems it is necessary to implement an effective security system, by setting up a good firewall, scanning for any computer viruses and regular maintenance. 

The security of a website is also useful in terms of visibility on search engines. In fact, Google “rewards” safe sites, to the detriment of unsafe sites, by showing them at the top of user search results. Greater visibility leads to more visitors, who can turn into customers, ultimately increasing the ROI.

Ongoing support 

By the term continuous support we actually mean two different but complementary aspects. In fact, the support must be provided both to the website and to the customers. 

Site support includes actions such as site design changes, continual plug-in updates, server and data backups, landing page maintenance, etc. In general, it is important to keep the website up to date, to ensure that page load times are fast and that all plug-ins and page links work properly. 

At the same time, it's important to ensure fast and efficient customer support, because a satisfied customer will be more eager to come back and build loyalty to your brand. All these measures guarantee the site a higher traffic and, consequently, a ROI improve. 

Site content management

Imagine spending every day in front of a shop window that, for months and months, always displays the same goods, without ever changing. You certainly don't want to go in and buy. The same is true for a e-commerce

Adding new products, content and promotion is a great way to attract potential customers to your site. So be sure to constantly post something new. 

To improve the ROIBut pay attention to SEO, the optimization of content for search engines. The latter, in fact, through precise rules, evaluate whether the content you have published is "deserving" or not. Based on these parameters, the new content published can be very positive for your business, or very harmful. 

Some of the best practices to optimize your content include researching relevant keywords on which to base new content, optimizing titles and meta descriptions, having inbound and outbound links, and optimizing the images you upload. 

For more information on this, we refer to ours article dedicated to SEO.

ROI analysis

A final aspect to consider concerns the periodic monitoring of the ROI. In fact, in order to maximize revenues, it is important to constantly analyze the ROI, through the formulas indicated above. 

This practice will allow you to check in which sectors of your e-commerce you get the highest profit margins and which ones do not perform as expected. Knowing this will allow you to direct your spending towards the sectors with the best profit margins. 

Ultimately, always have a clear idea of yours ROI will allow you to build and optimize the best marketing strategy for your e-commerce needs. 

Conclusions

With this article we have provided you with all the basic information to optimize your business strategy, based on the ROI. For an optimal result, however, we advise you to contact a team of experts in the sector, able to provide you with professional support and useful advice to maximize your ROI

Contact us for a quote or to request information.

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