You’ve launched a new marketing campaign. Obviously, this campaign has one of two goals: selling more products or generally increasing leads that (hopefully) turn into new customers. But not all marketing projects are created equally.
For marketing to be worthwhile, it needs to bring in a return on investment (ROI). The higher that ROI is, the better. But many people are left wondering how to calculate ROI.
While it sounds complicated, the good news is it’s not. There’s a simple calculation you can use if you remember a few key considerations. Continue reading to see what we’re talking about.
Basic Return on Invest Calculation
The most basic way to calculate your return on investment (ROI) is with a simple mathematic equation. Take the sales growth for your business or product and subtract the marketing or advertising costs. Divide the number you get by marketing costs to find your ROI for that specific period.
The calculation looks like this:
(sales growth – cost of marketing)/cost of marketing= return on investment
So, let’s say your sales growth for January is $10,000, and you spent $2,000 on marketing. The equation would like this:
(10,000 – 2,000)/2,000 = 4
For this equation, your return on investment is $4 for every $1 spent on marketing. This is, of course, only an example. Results will vary wildly based on the input for your specific company.
Considerations and Challenges
While calculating an ROI for marketing projects is simple, it does have additional challenges and considerations you should look at. The biggest among these is that marketing is a long-term investment. In the first few months of a marketing campaign, your ROI may be very low or even negative.
Marketing relies on substantial month-over-month growth in audience and sales. For this reason, you need to focus on whether your ROI is growing or not as time passes.
If we consider the example above as the third month of a marketing campaign, we’d want to look for growth at six and nine months. Let’s say the sales growth in month six is $50,000, and you’ve continued to invest $2,000 per month in your marketing.
The new equation looks like this:
(50,000 – 2,000)/2,000 = 24
In month six, you’re receiving an ROI of $24 for every $1 spent on marketing. When compared to an ROI of $4 in month three, this is a significant increase. The $4 in month three may not seem like much, but so long as you see consistent growth, your ROI is actually quite good.
Do You Have More Questions About How to Calculate ROI for Marketing Projects?
Calculating your return on investment for marketing projects can be done using a simple mathematic equation. However, it’s essential to consider other things when determining whether an ROI is good or not. This especially applies to marketing campaigns in their first few months after launch.
Do you have more questions about how to calculate ROI for marketing projects?
Feel free to browse our other blog posts. You’ll find many similar posts on and related subjects to help you learn more on the subject.
