Marketing Question the rest of the question is in the bottom?

[Abraham]

What is meant by R.O.I. and why do we need to take it into consideration when developing an effective advertising campaign

[jackie m]

Republic of Ireland

[Jessica]

Return on Investment. In order to be an effective campaign, there'd have to be results - as in a return on one's investment in the campaign.

[Jake]

For some businesses advertising can be their biggest single expense, identifying the most profitable ad design and channel is key to having a better Return On Investment.

Even seasoned marketers may have more money losing ads than winners, the key is to identify the losers quickly enough and focusing resources on ads that bring visitors who convert to sales.

Online marketers typically have to carefully track the profit earned from each different ad configuration, some recommend spending 2 or 3 times the earning potential on a particular ad abandoning it if no sales are made by then. After seeing a sign of potential profit further refinement may see that ad being profitable in the long run. Split testing is a common method to compare performance of 2 different ad or landing page designs, shifting toward the winning design style on each iteration.

[Doug]

First, that is a business management question, not a marketing question.

Here's a simplified example to answer your question. You spend $100 to run an advertisement and it attracts four buyers. Each buyer spends $20 on your product that cost you $5 each. Your total Investment is $120 ($100 for the ad and $20 for inventory).Your total return on investment (ROI) is 4x$20 = $80 which puts you in the red.
You would have to attract 7 customers who each spends $20 to have a positive ROI abd it would be $5.