How to calculate ROI in marketing
As a business owner and as a marketer, it is very important to know how to calculate ROI in marketing or what is the formula to calculate the return of investment in marketing. Therefore, below we provide the formula to calculate the ROI in marketing:
Formula to calculate ROI in marketing
To calculate the ROI in marketing you must use the following formula:
How to calculate ROI in marketing
To calculate the ROI in marketing you must subtract the income generated less the investment made, the result must be divided by the investment made. For example: If you have sold 20 shirts, and these shirts have a final price of 18 euros each, you will have obtained a total profit of 360 euros.
If to get these 360 euros and sell those 20 t-shirts, you have invested in Facebook Ads or another channel, a total of 60 euros. Your return on advertising investment will be: 360 euros (income generated) – 60 euros (investment made) / between 60 euros (investment made). The ROI calculation will be: 5 euros.
Also if you want, you can multiply x 100 to get the amount in percentage. In this case 500%.
This means that what you have invested to sell the 20 shirts has resulted in a return on investment of up to 500%, demonstrating that you have recovered your investment and that it has also reported profits.
This 500% is reflected in a 5: 1.
An acceptable ROI for a marketing campaign ranges from 4: 1 to 6: 1.
Any retail value of these values indicates that we must improve our campaigns. Some especially successful campaigns can have an ROI of up to 8: 1, but they are unique cases.
Why is it important to calculate the ROI in marketing?
There is a lot of talk about ROI in marketing. But why? Well, measuring the ROI in marketing has important benefits for your business. Among them, the following:
- It is important to know how much it costs you to sell a product or service in order to get the most out of your advertising investment and achieve profitability. You can determine all this when calculating the ROI.
- You will be able to make better decisions. Analyzing ROI will allow you to optimize the actions carried out in your digital marketing campaign. You can even see that you may need to change your strategy.
- By calculating the ROI you will be able to measure the results that digital marketing actions give you in the different channels. In this way you can determine which ones give you a better return on advertising investment. Which will allow you to choose to invest more or not in one channel or another.
To end
We hope that this formula of how to calculate the ROI in marketing will be useful to you to get the most out of your advertising investment and achieve profitability. If you need help in this, you can contact us and we will gladly assist you. Contact us here. On the other hand, if you want to keep updated with content similar to this, Follow us on LinkedIn and we will keep you updated.
