Question

Calculate the Marketing Return on Investment (ROI) for Apple. (7.5 pts) Calculate the Marketing Return on Investment (ROI) for Microsoft. (7.5 pts) Which company has the best ROI? (5 pts). Explain what ROI measures. (5 pts)

In 2014, Apple reported profits of more than $50 billion on sales of $182 billion. For that same period, Microsoft posted a profit of almost $30 billion on sales of $88 billion. So Apple is a better marketer, right? Sales and profits provide information to compare the profitability of these two competitors, but between these numbers is information regarding the efficiency of marketing efforts in creating those sales and profits. Appendix 2, Marketing by the Numbers, discusses other marketing profitability measures beyond the return on marketing investment (marketing ROI) measure described in this chapter. Review the Appendix to answer the questions using the following information from the two companies’ incomes statements (all numbers are in thousands):

	Apple	Microsoft
Sales	$182,795,000	$86,833,000
Gross Profit	$ 70,537,000	$59,899,000
Marketing Expenses	$    8,994,750	$15,474,000
Net Income (Profit)	$ 52,503,000	$27,759,000

Answer 1

Marketing Return on Investment: Marketing Return on Investment is a metric used to know the effetiveness of the marketing campaign. The formula to calculate the Marketing Return on Investment is as follows.

Marketing Return on Investment (ROI) = Net Marketing Contribution / Marketing Expenses

Net Marketing Contribution = Net Sales - Cost of Goods sold - Marketing Expenses

Here Cost of Goods sold is not Given, but Gross profit is given which is Net Sales - Cost of Goods sold. So

Net Marketing Contribution = Gross Profit - Marketing Expenses

Net Marketing Contribution for Apple = $70,537,000 - $8,994,750 = $61,542,250

Net Marketing Contribution for Microsoft = $59,899,000 - $15,474,000 = $44,425,000

Marketing Return on Investment for Apple = $61,542,250 / $8,994,750 = 6.8420 = 684.20%

Marketing Return on Investment for Microsoft = $44,425,000 / $15,474,000 =2.8709 = 287.09%

Apple Company has the best ROI as it has 6.8420 while Microsft has only 2.8709 Return on investment.

Marketing Return on Invstment is used by the organisation to to measure how uch revenue a marketing campaign is generating compared to the cost of the marketing campaign..So, it measures the ability of the Marketing campaigns to generate new revenue.