Marketing ROI Calculator
Understanding Your Marketing ROI
In the world of digital marketing, Return on Investment (ROI) is the most critical metric for determining the success of your campaigns. It measures the efficiency of an investment or compares the efficiencies of several different investments.
How the Marketing ROI Formula Works
Our calculator uses the standard business formula to provide you with an accurate picture of your profitability:
This formula accounts for both your direct ad spend and secondary expenses (COGS), ensuring you don't mistake high revenue for actual profit.
Key Definitions
- Marketing Spend: The direct cash outlay for your ads, whether on Google Ads, Meta, or influencer sponsorships.
- ROAS (Return on Ad Spend): A ratio that shows how much gross revenue you earn for every dollar spent on advertising. While ROI looks at profit, ROAS looks at revenue.
- Net Profit: What stays in your pocket after paying for the ads and the cost of delivering the product or service.
Example ROI Calculation
Imagine you run a Facebook campaign with the following data:
| Metric | Value |
|---|---|
| Ad Spend | $1,000 |
| Revenue | $5,000 |
| Product Costs | $1,500 |
| Marketing ROI | 250% |
In this scenario, your net profit is $2,500. By dividing that profit by your $1,000 spend, you realize a 250% return on your marketing investment.
What is a Good Marketing ROI?
While every industry varies, a 5:1 ratio (500%) is generally considered a strong ROI. A 2:1 ratio is often the break-even point for many businesses once labor and overhead are considered. High-growth software companies may target higher, while competitive retail markets might operate successfully on lower margins but higher volume.