Calculating ROI for Enterprise 2.0 projects
- What is ROI?
Return on investment, can be used to measure the value of an entire company or of a specific investment that a company might make. To define ROI, it is “The ratio of money gained or lost (whether realized or unrealized) on an investment relative to the amount of money invested. The amount of money gained or lost may be referred to as interest, profit/loss, gain/loss, or net income/loss. The money invested may be referred to as the asset, capital, principal, or the cost basis of the investment. ROI is usually expressed as a percentage rather than a fraction”.
- How to measure ROI?
Thus, the simplest term to calculate ROI that is companies must have more money coming in than money being spent on something.
Simple ROI = (Gains – Investment Cost) / Investment Cost * 100
The following picture illustrates ROI in a good way:
- Great ROI examples:
Dell sold $3,000,000 worth of computers on Twitter. Dell also tweets about existing promotions and answers customers’ queries.
BlendTec use low-cost online video with the theme ‘will it blend’ on YouTube. As a result, their videos have received over 50 million views and over 200,000 followers as well as 700% increase of their sales.
Gary Vaynerchuk – Family Wine Business uses social media to run his business. $15,000 in Direct Mail = 200 new customers, $7,500 Billboard = 300 new customers and $0 Twitter = 1,800 new customers. As a result, the family business exploded from $4 million to $50 million which is a remarkable achievement.