Negative ROI is the indicator that shows how much money the company is losing on an investment made. The term ROI in English means “Return Over Investment”.
Luisa Sepulveda
Jun 22, 21 | 6 min read
negative roi
Reading time: 5 minutes
If you don’t know what negative ROI is, in this text you will be able to understand everything about this indicator and how to deal with it!
To understand what negative ROI means, the first step is to understand what ROI is, or “return on investment,” a term you’ll hear a lot when talking about marketing .
ROI is a rate of return that identifies the profit your
company obtains through investments made in a given period of time , calculated as a percentage.
These investments include everything that is made
with future profit in mind, such as new marketing campaigns or training for the sales team .
Calculating ROI will help your niger email list 150000 contact leads company identify which strategies are successful and able to get you closer to your goals, as well as understand the performance of marketing campaigns and the effectiveness of each communication channel.
How to calculate ROI?
What are the causes of a negative ROI?
How to avoid negative ROI?
How to calculate ROI?
The simplest way to calculate ROI is:
ROI = ((INCOME – COST) / COST) * 100
To perform the calculation, you only need to identify the value of the income and the cost of the strategy to complete the formula above, so it will be possible to evaluate the performance.
From this calculation, it is possible to evaluate the return on each investment you analyze. The final result can vary greatly, as it can be a negative or positive percentage. If the result is positive, it means that your investment is bringing a return , that is, profit for your company.
Let’s look at an example, if the revenue from a customer acquisition strategy is $100 and the cost is $20, the ROI is 400%. From this, it is possible to deduce that every dollar you invest in this strategy will allow you to earn $4.
In the case of a negative ROI result, the percentage is below zero and that means that the company is losing money on this investment.
What are the causes of a negative ROI?
As we mentioned, a negative ROI is an indicator that the investment lost money, meaning that the company did not make a profit on the investment made.
In this case, all the strategies and processes of that investment must be analyzed to know what is working and what is interfering with good results .
From this analysis, it will be possible to identify which points need to be changed to improve. However, there are some reasons why the ROI of your company or strategy may be negative.
High cost
One of the causes of negative ROI is the fnac now in the cloud, with r2 systems need for a very high investment for a project to be viable . Here it is necessary to evaluate what costs make up this strategy and how they can be reduced.
This analysis includes investments such as the choice of paid media for the dissemination of a marketing campaign, a paid platform for your company’s web hosting , the cost of strategy analysis tools and even the cost of physical facilities or equipment if they are necessary for the project.
In the case of analysis tools, for example, you may be able to use free tools until your investment reaches expected returns over a certain period of time.
Another example is the high turnover of employees in your company, which can impact the increase in the costs of a strategy due to the increase in investment in professionals due to hiring or firing costs.
Since investment costs have a major impact on ROI, in the event of negative results, it is important to review them . After an initial analysis of the cg leads results, you can modify the amount invested and contribute to increasing the ROI.