Return on Revenue

Return on Revenue (ROR) is used to determine the profitability of a company by taking Net Income/ Revenue.  It is a financial tool used to year to year profitability performance.  But, you can take this same formula and apply it to marketing projects as well. 

 

Essentially what the ROR does is tell you the impact expenses have on the marketing project.  So it will help to tell you if the project is truly giving you a better return or not.  If you know the impact then you have a better ability to say if the project is worth keeping or not or how those expenses need to change in order to maximize your ROR.

 

This formula is also helpful to bridge the gap between financial tools and marketing tools, something that has been hurting marketing for years.  With this tool, finance knows how to use it (if your finance department doesn’t, they you might want to shine the light on their cost activities).  It’s simple, takes 5 minutes and can help in many situations to improve marketing’s position as an investment center rather than a cost center.

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1 Comment

Filed under Branding, Business, Marketing, Metrics

One response to “Return on Revenue

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