Very few businesses can afford to ignore their marketing return on investment. ROI is the metric that tracks how much income/revenue you generate as a direct result of your marketing campaign.
The figure you will calculate will show how viable and hopefully how profitable your marketing campaign or segment has been.
Calculating Return on Investment
A basic ROI calculation is as follows – revenue minus marketing spend divided by marketing spend and then multiplied by one hundred.
For example, if you spent £4,000 on a Google Ads PPC campaign that generates a total of £20,000 in attributable revenue, you would have a return on investment of 400%. This is based on 20,000 minus 4,000 divided by 4,000 and multiplied by 100.
Taking your marketing spend from your income leaves you with £16,000 of additional revenue. The higher the return on investment percentage – the more successful your campaign has been. You can apply this to many types of activity such as a PPC campaign group or an email database segment. It will highlight the more profitable areas to focus your budget on in future campaigns.
As a ratio you will be looking for multiples of the investment amount to gauge success. If you had a 2:1 ratio you would double your investment – in our example case generating £8,000 income – often only break-even for profit.
An accepted good return on investment is a 5:1 ratio, the example above shows a 5:1 ratio of £4,000 being generated with every £1,000 of marketing investment.