When ROI calculation is not needed
Posted: Mon Jan 20, 2025 3:52 am
At first glance, ROI may seem like the ideal way to measure performance. However, there are many situations in which ROI is not useful for assessing payback:
Long transaction cycle
If a company sells premium products or high-value services, as is often the case in the B2B space, the transaction cycle becomes longer and is divided into many stages. This makes the ROI calculation less objective.
If the client makes a overseas chinese in worldwide data decision over weeks, months or even years, then ROI will be practically useless. Having calculated the indicator, the company sees that in one period, large investments in marketing did not bring new deals. Therefore, the ROI ratio indicates that the project is unprofitable. However, in another period, small investments will bring huge income, the ROI value will indicate the profitability of the business. So the company can make the wrong decision, abandoning seemingly unprofitable actions. In fact, they had a positive effect on profit in the long term.
Working in complex markets
There are business areas where it is not so easy to calculate the average bill. The fact is that the amounts can differ greatly even for one client. For example, if a person bought goods for 5,000 rubles in one month, and for 100,000 rubles in another. Or a client bought a product once and now regularly orders related products. If a company only takes into account expenses and income, then the return on investment ratio will vary significantly depending on the selected time period.
For industrial equipment manufacturers and some construction companies that manufacture and service components for complex markets and projects, calculating ROI is difficult and will not provide objective information about the project.
Read also!
"How to increase the flow of customers by choosing the right method"
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Lack of financial goals
An organization can set different goals. For example, to make a brand more popular and recognizable. Then direct profit generation is not a primary task. And it will not be possible to calculate the ROI, since there is no monetary income. For example, an organization plans to create a loyal community. In this case, the ROI will indicate the unprofitability of the project, since the company will spend a lot of money on all sorts of events, promotions, but will not receive monetary income. In the example considered, efficiency must be determined using other metrics.
Dependence of sales on other conditions
It is worth considering that in the service sector, profit largely depends on the specifics of the service and customer support.
Let's say: a small organization has two managers, they regularly replace each other. At the same time, the costs of marketing, advertising and production do not change. The first manager showed good results during the month of work: he closed many deals and processed applications flawlessly. In this case, the ROI will be high. However, the second manager worked much worse. He was irresponsible in the application processing process and closed only one deal. Therefore, the ROI will be low. At the same time, if both managers work simultaneously next month, the coefficient value can be anything. The result will depend on the volume of high-quality processed applications.
How to achieve multiple growth in traffic and sales from your website?
Alexey Boyarkin
Dmitry Svistunov
Head of SEO and Development
Read more posts on my personal blog:
I have always been concerned about the issue of moving to a fundamentally new level. So that the indicators would grow not by 2 or 3 times, but by several orders of magnitude. From a thousand visits to ten thousand or from ten thousand to a hundred thousand, if we are talking about a website, for example.
And I know that such leaps are always the result of painstaking work in five areas:
Technical condition of the site.
SEO.
Collection of site semantics.
Creating useful content.
Working on conversion.
And at the same time, every manager needs an increase in sales and the number of applications from the site at the moment.
To get this growth, download our step-by-step template for increasing sales from the site:
Download templ
Long transaction cycle
If a company sells premium products or high-value services, as is often the case in the B2B space, the transaction cycle becomes longer and is divided into many stages. This makes the ROI calculation less objective.
If the client makes a overseas chinese in worldwide data decision over weeks, months or even years, then ROI will be practically useless. Having calculated the indicator, the company sees that in one period, large investments in marketing did not bring new deals. Therefore, the ROI ratio indicates that the project is unprofitable. However, in another period, small investments will bring huge income, the ROI value will indicate the profitability of the business. So the company can make the wrong decision, abandoning seemingly unprofitable actions. In fact, they had a positive effect on profit in the long term.
Working in complex markets
There are business areas where it is not so easy to calculate the average bill. The fact is that the amounts can differ greatly even for one client. For example, if a person bought goods for 5,000 rubles in one month, and for 100,000 rubles in another. Or a client bought a product once and now regularly orders related products. If a company only takes into account expenses and income, then the return on investment ratio will vary significantly depending on the selected time period.
For industrial equipment manufacturers and some construction companies that manufacture and service components for complex markets and projects, calculating ROI is difficult and will not provide objective information about the project.
Read also!
"How to increase the flow of customers by choosing the right method"
Read more
Lack of financial goals
An organization can set different goals. For example, to make a brand more popular and recognizable. Then direct profit generation is not a primary task. And it will not be possible to calculate the ROI, since there is no monetary income. For example, an organization plans to create a loyal community. In this case, the ROI will indicate the unprofitability of the project, since the company will spend a lot of money on all sorts of events, promotions, but will not receive monetary income. In the example considered, efficiency must be determined using other metrics.
Dependence of sales on other conditions
It is worth considering that in the service sector, profit largely depends on the specifics of the service and customer support.
Let's say: a small organization has two managers, they regularly replace each other. At the same time, the costs of marketing, advertising and production do not change. The first manager showed good results during the month of work: he closed many deals and processed applications flawlessly. In this case, the ROI will be high. However, the second manager worked much worse. He was irresponsible in the application processing process and closed only one deal. Therefore, the ROI will be low. At the same time, if both managers work simultaneously next month, the coefficient value can be anything. The result will depend on the volume of high-quality processed applications.
How to achieve multiple growth in traffic and sales from your website?
Alexey Boyarkin
Dmitry Svistunov
Head of SEO and Development
Read more posts on my personal blog:
I have always been concerned about the issue of moving to a fundamentally new level. So that the indicators would grow not by 2 or 3 times, but by several orders of magnitude. From a thousand visits to ten thousand or from ten thousand to a hundred thousand, if we are talking about a website, for example.
And I know that such leaps are always the result of painstaking work in five areas:
Technical condition of the site.
SEO.
Collection of site semantics.
Creating useful content.
Working on conversion.
And at the same time, every manager needs an increase in sales and the number of applications from the site at the moment.
To get this growth, download our step-by-step template for increasing sales from the site:
Download templ