ROI is the important tool to evaluate how well management performs. Profits happen when a company operates effectively. The management team is doing its job well if the company prospers, obtains funding, and rewards the suppliers of its funds. By tracking ROI, you will be able to calculate the success of your marketing ventures, and set your budget. It allows you to identify which one is a successful campaign and which one is not. ROI analysis is one of several approaches to building a financial business case. As decision makers, you evaluate the investment by comparing the magnitude and timing of expected gains to the investment costs. You will also look for ways to improve ROI by reducing costs, increasing gains, or accelerating gains.
Company managers must show that they can manage the owners’ investment and produce the profits that owners and creditors demand. The relationship between profit and the investment that generates the profit is one of the most widely used measures of company performance. ROI is used by creditors and owners to provide information about a company’s financial health. ROI can do more than measure a company’s performance, for example, to measure the performance of individual company segments when each segment is treated as an investment center.
Drive ROI, Know your customers! You need to know about your customers. What do they like or dislike about your product or service? Use surveys to measure your customer satisfaction, such as direct mail, telephone calls, or focus group. Keep written records of customer compliments and complaints, and review them.