Calculate your ROI marketing ? Guide & tips

Ingrowth marketing, the ROI (R & D) marketing measures the profits generated by all your activities or specific campaigns in relation to the expenses incurred. This indicator lets you know their real cost, to better guide your action plan. hipto guides you through the key steps to calculate theROI marketingunderstand its importance, use the right tools.

What is ROI marketing?

The ROI marketingmeasures the profitability of your sharesby comparing the profits generated with the costs incurred, in particular theacquisition cost.It is expressed either in percentage or in value. A positive ROI means that your marketing efforts are paid, a negative ROI indicates a loss.

Formulas for calculating your ROI marketing

ROI marketing formulae transform your raw data into accurate, usable performance indicators.

Basic ROI Formula

The standard ROI formula is: (benefit – cost)/cost. For example, if you invest 4,000 euros in an advertising campaign and generate 10,000 euros of revenue, your ROI is: (10 000 – 4,000)/1,000 = 6:1 or 600%. 1 euro invested earns you 6 euros of turnover.

Formula for calculating your ROAS

The ROAS (Return on Ad Spend) measures the return on investment of your advertising expenses. Its formula is: turnover attributed to a campaign/expenditure committed. For example, if you spend 500 euros in advertising and generate 2,000 euros in sales, your ROAS is 4:1.

Factors to consider in your calculation

They guarantee reliable, more relevant results by refining your ROI marketing calculation.

The cost of a lead

Thecost of a qualified lead(CPL) is used to assess the effectiveness of your acquisition campaigns, which are designed to generate leads. Calculate it by dividing your marketing expenses by the number of contacts generated. For example, if a campaign costs 1,000 euros and generates 50 leads, theprice of leadis 20 euros.

Direct and indirect costs

Direct costs include marketing expenses. Indirect costs include salaries, software, hardware. Incorporate these two types of costs into your ROI calculations to get a complete picture.

Lifetime Value

The Lifetime Value (LTV) represents thetotal profit generated by a customer over its entire relationship with your brandCalculate it by multiplying the average value of an order by the purchase frequency and the duration of the customer relationship. Integrating LTV into your ROI offers a long-term vision of your marketing investments.

For example, if a customer spends an average of EUR 100 per order, three times a year and remains faithful five years, his LTV is EUR 1,500. This information justifies acost of acquisition prospecthigher for customers with high added value.

Why is it important to measure your ROI marketing?

Evaluating your ROI marketing gives you the possibility tooptimize your investmentsIt helps you identify the most efficient channels and adjust your marketing strategy accordingly. By following it regularly, you can quickly detect unprofitable campaigns. This key indicator provides concrete data to negotiate additional budgets with management.

What is a good ROI?

Generally, a ROI of 5:1 (500 %) is considered good. However, some sectors like e-commerce target higher ROIs around 10:1. In B2B, a ROI of 3:1 can be acceptable due to longer sales cycles and higher contract values. For start-ups in the growth phase, a negative ROI can be temporarily tolerated to gain market share.

Tools and techniques for measuring ROI or ROI return

They allow you to automate, analyze, and effectively visualize your ROI marketing data.

Google Analytics

Google Analytics is a free tool to track web traffic,conversion rate, sources of income. Configurecustom conversion objectives1to accurately measure the impact of your marketing campaigns on your KPI: destination, duration, event, pages/screens per session.

CRM software and marketing automation

TheCRM tools, like Salesforce or HubSpot, offer aoverview of your customer interactions. They allow you to follow the lead's path to sale.marketing platforms automationlike Marketo or ActiveTrailautomate campaign monitoringThey provide detailed reports on the performance of your marketing actions.

Allocation models

The attribution modelsallocate credit for conversions between different contact pointsGoogle Ads, for example, offers two2. The last click model and the data-based model.

To illustrate them, imagine a scenario with a pizzeria in Bordeaux. A customer does several searches before booking ("Pizzeria Bordeaux", "Best Bordeaux Pizzeria", "Pizzeria Bordeaux delivery"), each triggering an ad.

• According to the last click method, only the final keyword "pizzeria Bordeaux delivery" is credited.

• Conversely, the data-based approach allocates a share of the credit to each keyword according to its contribution to conversion.

The ROI marketing calculation is a key lever for effectively managing your expenses. Use the formulas and tools presented in this guide to get accurate data. Don't forget to integrate all costs and consider the long-term customer value (Lifetime Value).

The three key points to be noted:

• ROI marketing measures the return on investment of your shares by comparing the profits generated with the costs incurred.

• The ROI marketing calculation is based on a simple formula: (benefit – cost) / cost.

• Regular monitoring of ROI helps to improve the profitability of its marketing actions.

1https://support.google.com/analytics/answer/1032415?hl=fr#goal_type&zippy=%2Cau-sommaire-de-cet-article2https://support.google.com/google-ads/answer/6259715?hl=fr

Learn howcalculate the number of leads needed to achieve your business goalsMaximize your ROI right now with hipto.