How to Calculate Marketing Return on Investment (ROI)
Updated: Mar 13
Do you ever wonder how effective your marketing efforts are?
As a business owner, you want to get the most out of your investments. But do you ever sit down and look at the numbers?
If you're not sure whether you're getting a good return on investment, it's time to start calculating your ROI. It's a lot easier than you think. In this blog post, we'll explain marketing return on investment (ROI) and give you a simple (and complex) formula for calculating. Once you understand it, you'll be able to make better decisions about where to allocate your marketing resources.
Marketing return on investment (ROI) measures the profitability of your campaigns. It tells you how much money you're making relative to how much you're spending. The higher your ROI, the more profitable your investment is.
A basic formula to calculate your ROI would be as follows:
ROI= Marketing Revenue - marketing spend
/ marketing spend x100
This formula is a quick & easy way to get your number, but if you want to go more in-depth with it, we like to use venture harbour's calculator because it gives you a more precise number. This calculator "forces you to attribute revenue to your conversions goal", as mentioned in the article.
There are several reasons why return on investment is useful for you as a business owner. First, it allows you to compare the profitability of different investments. If you're trying to decide whether to invest in paid advertising or SEO, for example, calculating ROI can help you determine which one is more likely to generate a higher return. Along with measuring success, ROI can tell you what strategies or working. If your current ROI is low, that's a sign that you need to make some changes in your campaign.
There are some drawbacks to using ROI as a measure of success. First, it's important to remember that it's only one metric and should be considered alongside other measures such as customer lifetime value or market share. Many variables go into it, so it isn't always an accurate indicator of what you're getting out of your ad spend. ROI is often used to justify high marketing budgets, which leads to overspending on campaigns that may not be effective.
Despite its shortcomings, return on investment is still a valuable tool for evaluating marketing effectiveness. If you're not already tracking your ROI, we recommend that you start monthly. By understanding ROI, you'll be able to make better decisions about where to allocate your marketing resources and how to optimize your campaigns for maximum profitability.
At the end of the day, marketing return on investment is important because it allows businesses to measure how their marketing efforts are affecting their bottom line. There are pros and cons to measuring marketing ROI, but when done correctly it can be a valuable tool for you as a business owner. Let us know if you need help getting started with your own marketing ROI calculation- or if you need marketing done for you!