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Definition of ROI

By Terry McC ·
I am looking for a good definition for ROI - Return on Investment. The gray area we are having discussion on is does a project that must be done to strategically keep up with the competion to provide the same service level have an ROI?

Example isclient needs to implement a call centre as competition is providing that value added service. Does this have an ROI and what does the ROI compare against,(do nothing and loss client sales?)

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Quantifying ROI

by timwalsh In reply to Definition of ROI

You've got the definition, or simply put: "if I invest X dollars in a project, what return or benefit do I get from it?" You've also got a good grasp of the major problem that surrounds ROI which is trying to quantify it.

Bean counters always expect ROI to be quatified in dollars. However, many time you cannot directly quantify it in dollars. ROI can be increased productivity (which translates to more work for the same buck), decreased down time (which translates to lower maintenance costs and greater productivity), etc. Or in your case, the ROI is maintaining your current client base (which translates to maintaining current profits), and possibly becoming more competitive (which translates to increased profits).

Every dollar a business spends in operating expenses has an ROI of some sort. Otherwise, the business doesn't survive.

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by areets In reply to Definition of ROI

Take the generic definition of ROI, you have obviously identified the factors. Ask yourself the question that has a multi-tiered answer. How do we find the equilibrium between cost impact of the value added costs against expected rate of new clientsand build on loyalty (customer retention rate) over a given period (minimum three years). It will help.

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