Return on Investment (ROI)Return on investment is a popular and potentially important metric allowing for the comparison of disparate investments.
A critical requirement for calculating ROI is knowing the net profit generated by a specific investment decision. According to the authors, there is confusion within management over the use of ROI. However, as ROI is understood across disciplines, it is a powerful metric to communicate across the organization.
Unmuddling ROI:
The authors advise that if a manager is assessing the financial return on an investment, then ROI is an appropriate metric and can be calculated by dividing the incremental profits by the investments. Agribusiness marketing managers who are passionate about establishing the credibility of the value created through marketing should be thorough in their use of metrics. Most importantly, they should be able to understand the metric, its use and what it represents.