How to Calculate Marketing ROI as a Marketing VP / Director

May 15, 2024
By: Katie McDermitt in the Marketing category.

One of the biggest frustrations for marketing leaders within an organization is being able to clearly demonstrating ROI of marketing efforts to upper management (or stakeholders).

• It can be difficult to clearly demonstrating ROI of marketing efforts to upper management or stakeholders.
• You wish for an easy and accurate way to measure the impact of marketing strategies on revenue.
• We all have the fear of investing heavily in a marketing strategy that does not yield measurable returns.

Steps to Calculate ROI (Simple and Straightforward Method):

1. Identify the Costs:
   • Total Investment: Calculate the total cost of the marketing campaign, including all expenses like advertising spend, salaries of the marketing team, costs of tools and software, and any third-party services used.
2. Track the Revenue Generated:
   • Direct Revenue: Measure the revenue that can be directly attributed to the marketing campaign. This can involve tracking specific metrics such as sales from a campaign-specific landing page or through using promo codes.
   • Lift in Revenue: Consider any increase in overall sales that occurred during the marketing campaign which can reasonably be attributed to the marketing efforts.
3. Calculate Net Profit:
   • Net Profit = Revenue from Campaign – Cost of Campaign.
   • This step requires accurate data collection and attribution to ensure you’re measuring the true impact of the marketing spend.
4. Calculate ROI:
   • ROI Formula: $(\text{Net Profit}/\text{Cost of Campaign})\times 100$
   • This final step will give you the ROI as a percentage, indicating how much profit each dollar of your marketing spend generated.

Example of Calculating ROI on a Marketing Campaign.

Suppose your company spent $10,000 on a marketing campaign. By the end of the campaign, you tracked $30,000 in sales that could be directly attributed to these efforts. Here’s how you would calculate the ROI:

• Net Profit: $30,000 (revenue) – $10,000 (cost) = $20,000
• ROI: $(\$20,000/\$10,000)\times 100=200\%$

This ROI of 200% means that for every dollar spent on the campaign, your company earned two dollars in profit.

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