When your campaign has finished, and you are either a) licking your wounds b) celebrating your success (depending on the outcome!) it’s very important to calculate the return on investment of your campaign. This will help you to understand which channels provide you with the best value for money for your marketing efforts. 

 

Sometimes a quick glance at your channel data might make you think that a high traffic channel is performing well, or that a channel that has resulted in more conversions is most efficient.

 

Calculating your return on investment is a robust way of determining which channel is most economical based on your conversion objective.

 

When we calculate ROI we use data on our spend (investment) and revenue (return) to determine performance. Put simply, the higher figure for return on investment, the better. 

 

To calculate ROI, you will need to understand the amount of revenue that has been generated by a particular channel, and the amount you spent on marketing for that channel. Google Analytics eCommerce tracking can be an essential tool in understanding the amount of revenue that your campaign has generated, but you may also be able to calculate this manually if this data isn’t available to you.

Businesses often refer to ‘ROI’ or ‘return on investment’, but what is meant by this? Well, it’s one of those phrases that pretty much does what it says on the tin. It tells you what you can expect to get back from the effort you put in. This is often expressed as a monetary amount or a decimal.

 

The value you get back indicates the magnitude of the yield of your return from your investment. So an ROI of 10 indicates that you are achieving roughly 10 times the return of your initial investment. You can think about this like a slot machine at a casino, where you might put in 1 coin and get back 10 coins that each have the same value as your original coin. Your return from your original investment is 10 coins, so an ROI of 10.

 

You can apply this principle to your marketing efforts, and this will help you to understand where your efforts are most effective, and help you to prioritise your best performing marketing.

 

The higher your ROI, the better. Calculating your return on investment also relies on you knowing cost per acquisition, total spend and total number of sales.

 

We also have a handy cost per acquisition calculator that you can use to calculate your cost per acquisition.