Return on Investment or simply ROI is the calculation of the profit earned on
investment. The formula to calculate ROI is as follows:
ROI = (Return − Investment)/Investment
To understand the ROI from Mobile Marketing, let’s assume:
1. Customer Lifetime Value (CLV)
CLV = Avg. Revenue per customer × Avg. No. of visits
Say, $100 per customer × 10 visits = $1,000
2. Calculate allowable Cost of Customer Acquisition (COCA) as:
COCA = CLV × (% allocated to new customer)
Say, $1000 × 10% = $100
Now, reallocate your mobile marketing budget by dividing them into ‘Branding’
and ‘Direct Response’. For example, allocate 20% of your budget to direct
response:
Say, direct response budget = $200,000
20% of $200,000 = $40,000
Hence, mobile marketing budget is $40,000.
Now, calculate the number of estimated customers from new mobile marketing
campaign.
CLV= $1,000
Budget= $200,000
COCA= $100
Customers acquisition = budget ÷ COCA
Hence, $200,000 ÷ 100 = 2,000
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Therefore, new customers = 2,000
Direct response (of new customers) = 2,000
Mobile marketing new customers = 400
Conclusion — On 20% investment, you will gain 20% new customers.
