to calculate the return on investment in a marketing campaign | Promotion
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ROI, or return on investment, is a common performance measure used primarily for its simplicity. The ROI calculation divides the amount of investment made by the investment cost. The calculation is the same in marketing, but the cost of the asset is treated as an expense in corporate accounting, so that the return on investment can be challenged by conservative accounting. Even so, the measure provides a clear comparison of the profitability point of view marketing campaign.
Calculate the gross margin on the product. If the product is sold at a price of $ 10 and $ 5 is left after the product cost, gross margin was 50 percent.
Calculate the profit margin. If it costs 10 per cent of the sale to take control, package, ship and handle returns, profit margin is 50 percent (gross) minus 10 percent (operating costs) or 40 percent.
Determine the amount of money invested in a marketing campaign. For this example, $ 100 is spent on a campaign to sell your product for $ 10.
Calculate the total profit after the sale of your marketing campaign. For this example, you sell 100 items totaling $ 1,000. Your profit is $ 400 --- 40 percent of $ 1,000.
Subtract the cost of the campaign the profit made on the campaign. For this example, you subtract $ 100 from $ 400 for a total of $ 300.
Calculate the ROI of the marketing campaign. Divide the profits after the cost of the campaign by the cost of the campaign. The calculation is $ 300 divided by $ 100, which is equal to 3. Your return on investment is 300 percent.
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