To measure the ROI of an advertising action or campaign, you must calculate the difference between the revenue generated by that action and the cost incurred. Then, you must divide the result by the cost.
ROI = (revenue achieved – cost of sales achieved) / cost of sales achieved
ROI calculation example
Let's say a company launches a Google Ads campaign with a budget of €10,000, with the aim of increasing sales of one of its products. At the end of the campaign, the company has recorded an increase in sales of that product of €15,000.
To calculate the ROI of this advertising campaign, we can use the formula above. In this case, revenue is the additional €20,000 that the company has earned thanks to the campaign. Expenses are the €10,000 that the company has invested in the campaign.
In this example, the ROI is 50%, but the ROI can also be france number data negative, when the income obtained from the campaign does not exceed the total costs incurred to carry it out (in this case, the investment in Google Ads).
Beyond its formula: relevant clarifications
Although the ROI formula is quite simple, there are many points of view related to how to understand it. Because… What do we consider to be revenue obtained and cost of sales?
Without a doubt, for its effective calculation we should take into account those revenues that we have obtained from the sale of our product or service and that are directly related to our advertising campaign. , that is, the revenues that we have obtained thanks to that specific campaign.
On the other hand, there are many points of view regarding costs that differ when calculating them. While some think that it is best to include only those costs directly associated with the advertising campaign, such as the cost per click . , others suggest the idea of also including the costs associated with the production of said good or service, which would include fixed costs and variable costs. Therefore, we can see that although the formula is easy, the complicated part is choosing which income and costs to include in it.