ROI Calculator: How to Calculate Marketing ROITool
Most performance marketers are *still* measured on activity rather than results.
Yet most businesses invest in performance marketing because they want to generate results – i. e more money.
This marketing ROI calculator will help you calculate a basic return on marketing investment.
ROI is one of the most important and easy-to-understand KPIs to demonstrate the effectiveness of marketing campaigns for everyone in the organisation. From executives to other departments, and marketing teams – everyone understands ROI.
What exactly is marketing ROI?
Marketing ROI is a financial metric that shows how much return you generate on your marketing investment.
Marketing ROI is used to justify marketing spend and budget allocation for marketing campaigns.
How to calculate marketing ROI?
For example, if your marketing campaign has generated £100,000 revenue over the past financial year and the total marketing spend on that campaign is £28,000, then your marketing ROI calculation would be as follows:
£100,000 – £28,000 = £72,000
£72,000 / £28,000 = 2.57
2.57 x 100 = 257%
Your ROI is 257%.
ROI is usually shown as a percentage, but it can also be shown as a ratio. For example, if your ROI is 500%, you can express it as 5:1. This means that for every £1 invested into the marketing campaign, you generated £5 of profit.
PRO TIP! When you type in your marketing spend into our calculator above, think carefully of whether you want to include only the advertising costs or all the costs involved in the making of the campaign including design, copy, research, and management fees.
Whichever option you choose, you want to be consistent about what you include.
What does a good ROI look like?
One of the most frequent questions clients ask is: what is a good ROI?
Is 200% ROI a positive or negative result?
The answer is: It always depends on the context.
For example, if a company is used to operating at 200% marketing ROI year-on-year, then it is an expected result and anything below that would be considered negative.
Here at Digivate, we always encourage our clients to establish clear ROI goals before we launch a campaign.
Why is marketing ROI so important?
There are many reasons ROI is some important to marketers:
- Marketing ROI helps to justify your marketing investment – so you can move away from the idea that marketing is a fluffy expense that can be cut when times get tough
- Marketing ROI helps to calculate growth potential – for example, if you marketing ROI is 257% and generate £100,000 revenue from £28,000 investment, then, in theory, you could double your profit by doubling the investment.
- Marketing ROI helps to attribute failure & success – you can use ROI to demonstrate your successes, identify failures and learn crucial lessons along the way.
The disadvantages of marketing ROI
The biggest challenge of measuring marketing ROI is attribution.
How do you prove the value of your cross-channel marketing campaign, where every blog post, ad view, email campaign and lead generation campaign lead to the final sale?
If you can attribute all of these touchpoints to the sales they lead to, then you can calculate ROI with some accuracy.
Without proper marketing attribution, you won’t be able to calculate accurate ROI at this level.