ROI refers to the return on investment, and its calculation formula is: (annual profit before tax/total investment)*100%=return on investment. Usually we use return on investment to measure the profitability of a company, but the return on investment is often time-sensitive and is limited to the year used for calculation.
E-commerce ROI:
According to the calculation formula ROl=profit/investment x 100%, we can get: ROl of e-commerce=expenditure/sales amount.
For example: a piece of clothing was promoted through the platform, and the results of the backend statistics for one week were as follows: the promotion cost was 100 yuan and the turnover was 200 yuan. Then the ROI of e-commerce this week = 100:200 = 1:2.
The sales amount of e-commerce = click * conversion rate * average order value, and the cost = click * average click cost.
So in the end we can also deduce that: e-commerce ROI = average order value * conversion rate / average click cost.
Ways to improve ROI:
1. Optimize the delivery time
First of all, we should conduct a specific analysis on specific categories, optimize the time of discounts by time period by analyzing the peak period of transactions, or based on the high conversion time period of the main transaction words.
According to big data analysis, conversion rates are higher at 3 pm and 7 to 10 pm, so we can increase time-sharing discounts during these two time periods, reduce time-sharing discounts during other time periods, or simply shut down the campaign.
2. Optimize the delivery area
From the perspective of most categories, in terms of geographical distribution, we can analyze the data from the accumulated regional data and the traffic analysis of the main transaction words, and then draw conclusions, find out the regions with high conversion and high ROI, and then carry out distribution.
3. Set different premium ratios
The so-called premium ratio can be understood as the authorization we give to the platform to bid. For example, when the keyword bid is set to 2 yuan, it can be ranked in the first page of main search. If we set the bid to 1 yuan, the ad position will be ranked very low because of the low bid. Sellers can then achieve the purpose of targeted promotion by setting different premium ratios (100%-400%) for different groups of people, which will relatively filter out inaccurate traffic.
4. Search for people
Searching for people is the most efficient and direct way to improve e-commerce ROI, because the click-through rate, transaction rate, and conversion rate of the people who search are generally relatively high. By giving high premiums to high-ROI population tags and low premiums or even no premiums to low-ROI population tags, we can improve the ROI of our store.
This is the end of the introduction to ROI in this issue. If you want to get more information about ROI, please pay attention and we will continue to answer your questions~
