App: How To Accurately Calculate Your Marketing Campaign Return on Investment (ROI)

How To Use The Marketing Campaign ROI Calculator

A calculation that I continue to see botched in our industry is how marketers calculate their campaign return on investment (ROI). The vast majority of marketers do a simple calculation of the campaign using the revenue produced by the campaign and the expenses of the campaign:

\(ROI=(\frac{\text{Revenue}-\text{Expenses}}{\text{Expenses}})\times100\)

This is an oversimplification that could lull a marketer into a false sense that their campaigns are performing well... when they're actually not. Why? You're missing some essential expenses as well as some possible additional revenue.

In order to accurately measure your marketing campaign's ROI, you have to incorporate all of the expenses associated with it:

• Direct campaign expenses - these are the expenses directly related to the campaign. Examples include advertising expenses, data purchases, print costs, postage, etc.
• Marketing platform expenses - this is the technology that you have licensed to execute these campaigns. Examples include graphic design software, marketing platforms, etc.
• Human resource expenses - this is the time spent by your marketing team on the development, execution, and measurement of the campaign.

Additionally, marketers often underestimate the total revenue associated with the acquisition of a new customer.

• Additional annual revenue - even if only a small percent of these new customers make a repeat purchase or increase their spending with you, that revenue should be attributed to the source campaign that you acquired them on. One way of calculating this is by determining revenue that is generated outside of your marketing initiatives over the course of the year, then dividing that by the number of total customers. Now multiply that amount by the number of new customers you acquired.

So... a more accurate calculation would be:

\(ROI=(\frac{\text{(Total Annual Revenue From Campaign)}-\text{(Total Campaign Expenses)}}{\text{(Total Campaign Expenses)}})\times100\)

Where:

• Total Annual Revenue From Campaign = Direct Revenue + Additional Annual Revenue
• Total Campaign Expenses = Direct Campaign Expenses + Platform Expenses + Salary Expenses

Salary expenses are generalized in this calculator by using the entire salary budget of your full-time employees and then calculating the average hourly rate by the total number of hours spent on the campaign.

And here's a nice simple calculator to calculate your marketing campaign's return on investment. If you add your email address (optional), it will also email you with a breakdown of the data you provided and the results.

If you're getting this article via a feed or email and don't see the actual calculator, just click through here:

Marketing Campaign ROI Calculator

We could go even more granular with the calculation, but this should be far more accurate for you than the oversimplified marketing campaign ROI calculation that many marketers use.

Let me know how you like this calculator, see any issues with the calculations, or want additional options... just comment below!