Marketing return on investment (ROI) measures the profits generated by all your activities or specific campaigns compared to the expenses incurred. This indicator allows you to know their real cost, to better guide your action plan. hipto guides you through the key steps to calculate marketing ROI , understand its importance, use the right tools.
Table of Contents
What is marketing ROI?
Formulas for calculating your marketing ROI
Factors to consider in your calculation
Why is it important to measure your marketing ROI?
What is a good ROI?
Tools and techniques for measuring your return on investment or ROI
What is marketing ROI?
Marketing ROI measures the profitability of your actions bc data vietnam by comparing the profits generated to the costs incurred. It is expressed either as a percentage or as a value. A positive ROI means that your marketing efforts are paying off, a negative ROI indicates a loss.
Formulas for calculating your marketing ROI
Marketing ROI calculation formulas transform your raw data into precise, actionable performance indicators.
Basic ROI Formula
The standard ROI formula is: (profit – cost)/cost. For example, if you invest €4,000 in an advertising campaign and generate €10,000 in revenue, your ROI is: (10,000 – 4,000)/1,000 = 6:1 or 600%. €1 invested brings you €6 in revenue.
Formula to calculate your ROAS
ROAS (Return on Ad Spend) measures the return on aggressive telemarketing: how to defend yourself investment of your advertising spend. Its formula is: revenue attributed to a campaign / expenditure incurred. For example, if you spend €500 on advertising and generate €2,000 in sales, your ROAS is 4:1.
Factors to consider in your calculation
They guarantee reliable, more relevant results, by refining your marketing ROI calculation.
The cost of a lead
THEcost of a qualified lead(CPL) is used to evaluate the effectiveness of your acquisition campaigns, designed to generate leads. Calculate it by dividing your marketing expenses by the number of contacts generated. For example, if a campaign costs 1,000 euros and generates 50 leads, theprice of a leadis 20 euros.
Direct and indirect costs
Direct costs include marketing expenses. Indirect costs asia email list include salaries, software, hardware. Include both types of costs in your ROI calculations to get the full picture.
The Lifetime Value
Lifetime Value (LTV) is the total profit generated by a customer over their entire relationship with your brand . Calculate it by multiplying the average order value by the purchase frequency and the length of the customer relationship. Integrating LTV into your ROI provides a long-term view of your marketing investments.
For example, if a customer spends an average of 100 euros per order, three times a year and remains loyal for five years, their LTV is 1,500 euros. This information helps justify acustomer acquisition costhigher for high value-added customers.
Why is it important to measure your marketing ROI?
Evaluating your marketing ROI gives you the opportunity to optimize your investments , by allocating your resources efficiently. It helps you identify the best performing channels and then adjust your marketing strategy accordingly. By tracking it regularly, you can quickly detect unprofitable campaigns. This key indicator provides concrete data to negotiate additional budgets with management.
What is a good ROI?
Generally, an ROI of 5:1 (500%) is considered good. However, some industries like e-commerce aim for higher ROIs, around 10:1. In B2B, an ROI of 3:1 may be acceptable due to longer sales cycles and higher contract values. For startups in the growth phase, a negative ROI may be temporarily tolerated to gain market share.
Tools and techniques for measuring your return on investment or ROI
They allow you to automate, analyze, and visualize your marketing ROI data efficiently.
Google Analytics
Google Analytics is a free tool to track web traffic, conversion rate, revenue sources. Set up custom conversion goals 1 to accurately measure the impact of your marketing campaigns on your KPIs: destination, duration, event, pages/screens per session.
CRM and marketing automation software
CRM tools , such as Salesforce or HubSpot, provide an overview of your customer interactions . They allow you to track the path from lead to sale. Marketing automation platforms such as Marketo or ActiveTrail automate campaign tracking . They provide detailed reports on the performance of your marketing actions.
Attribution models
Attribution models distribute credit for conversions across different touchpoints . Google Ads, for example, offers two . The last-click model and the data-driven model.
To illustrate, let’s imagine a scenario with a pizzeria in Bordeaux. A customer performs several searches before booking (“pizzeria Bordeaux”, “best pizzeria Bordeaux”, “pizzeria Bordeaux delivery”), each triggering an ad.
According to the last click method, only the final searched keyword “pizzeria Bordeaux delivery” is credited.
Conversely, the data-driven approach assigns a share of credit to each keyword based on its contribution to the conversion.
Calculating marketing ROI is an essential lever for effectively managing your expenses. Use the formulas and tools presented in this guide to obtain precise data. Don’t forget to integrate all costs and consider the long-term customer value (Lifetime Value).
