Ways to calculate ROI for online marketing
One of the many benefits of online marketing is that it enables more
accurate calculation of return on investment (ROI). For example, if a company
is using an ad that costs a specific amount of money every time it is clicked,
the number of times the ad is clicked times the cost of the ad gives us the
investment in that specific ad. The number of online purchases that resulted
from users who clicked on the ad is the revenue created from that ad.
Return on Investment (ROI) measures the
profit earned from each investment. It’s calculated as a percentage:
%age
ROI = (Return - Investment) X 100
Investment
Total revenue - is the total revenue or sales generated from the campaign.
Gross profit - is the revenue minus the cost
of goods to produce and/or deliver a product or service. This includes multiple
factors and costs involved in development, marketing and delivery of the
service.
Net profit is
the gross profit minus expenses
Additional cost variables can be:
· Creative
· Printing
· Technical
(email platforms, website coding, etc.)
· Management
One basic formula uses the gross profit for units sold in the campaign and the marketing investment for the campaign:
%age ROI = Gross Profit – Marketing Investment
Marketing Investment
Using Customer Life Value in place of Gross Profit is another ROI calculation
option. CLV is a measurement of the total profit generated from a single
customer or group of customers over their lifetime with your company.
%age ROI = Customer Lifetime Value – Marketing investment X
100
Marketing Investment
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