Skip to content 
Venturing into the world of calculating marketing ROI can be intimidating – it seems everyone’s got a different formula! Many clients ask us about how product sampling can impact ROI, and the first step to determining this is getting the right data and making the right calculation. So we’re going to test drive several different formulas, show you how to use them and the results you could, as well as discuss the key challenges in any marketing ROI calculation
How to Measure Marketing ROI
Measuring marketing ROI can feel like chasing a moving target, especially for more creative or experiential marketing activities that resist easy tracking methods. Traditional metrics like sales figures from PPC ads might seem more straightforward, but a well-rounded approach considers a broader range of factors.
Here’s where a data-driven mindset becomes crucial. By monitoring these key metrics, you can gain valuable insights into the effectiveness of your marketing strategies, even if directly attributing revenue remains a challenge:
Time Investment: Track the time dedicated to content creation. This helps determine your content production process’s efficiency and identify areas for improvement.
Production Costs: Include all expenses associated with content creation, including software subscriptions, freelancer fees, and stock photo purchases.
Promotional Costs: Consider any additional costs associated with promoting your content, such as social media advertising or influencer partnerships.
Website Analytics: Leverage tracking URLs and website analytics tools to understand how your content drives traffic to specific landing pages.
Non-Financial Returns: Don’t underestimate the value of non-revenue metrics like social media engagement, brand mentions, or website traffic spikes. These indicators can signal growing brand awareness and audience interest, laying the groundwork for future conversions.
By analyzing this data alongside traditional metrics like leads generated and conversion rates, you can paint a more complete picture of your content marketing ROI. Remember, a successful marketing strategy goes beyond immediate sales figures; it’s about building long-term customer relationships and brand loyalty.
When calculating marketing ROI, it’s essential to:
Set Clear Goals and KPIs: Define specific goals for your marketing campaigns and identify key performance indicators (KPIs) to track progress.
Data Tracking and Analysis: Continuously track and analyze relevant data to understand what’s working and what needs improvement.
Customer Journey & Attribution: Consider the customer journey and leverage attribution models to understand how different touchpoints influence purchase decisions.
Regular Reviews and Adjustments: Regularly review and adjust your ROI calculations as market conditions and campaign strategies evolve.
Understanding the Metrics: Each metric used in ROI calculations serves a distinct purpose. For instance, revenue/bookings measure sales performance, while CPA focuses on the cost of acquiring new customers. Regardless of the chosen metrics, the core ROI formula often remains the same.
How to Calculate Marketing ROI
Simple Marketing ROI formula
The most basic Marketing ROI formula is (Sales Increase – Marketing Cost) / Cost = ROI of Marketing. If you want an absolute number (ie to plot on a scale), you can use this result, if not, then you’ll want to time by 100 to get your ROI as a percentage. In terms of metrics you’ll need to know:
Sales Increase: Depending on your goals, this can be represented by various metrics. It could be total revenue generated, new customer acquisition, or lead generation – you’ll likely track these in a CRM or be able to get from Google Analytics if your conversion and transactions are set up correctly.
Cost of Marketing: This includes all expenses associated with your marketing campaign, such as advertising spend, salaries for marketing personnel, content creation costs, and software subscriptions.
Note: The basic marketing ROI formula assumes that any sales growth stems from marketing activity. If you want to be extra accurate benchmark this against sales comparisons before your campaign or strip out your normal level of monthly sales growth with this calculation: (Sales Growth – Average Organic Sales Growth – Marketing Cost) / Marketing Cost. Read more about this in Investopedia’s article.
Marketing ROI Percent Change Formula
A per cent change in marketing ROI formula may be best for tracking change over time. This formula is (% Change in Revenue) / Marketing Cost x 100% = ROI. You can calculate your per cent change in revenue by subtracting your usual organic revenue growth from your total revenue growth during the time period you’re looking to measure marketing activity in.
Other useful formulas to determine value
1. Customer Lifetime Value (CLTV)
Customer Lifetime Value (CLTV) can help you determine how valuable the leads or customers you’ve brought in will be over time for your business, but that isn’t necessarily exclusive to marketing. Unless you have easy access to it, you’ll most likely need an analyst to work out customer lifetime value itself, based on the total revenue that a typical customer is expected to generate over their lifetime.
You can calculate the lifetime value of your Marketing ROI using this formula: (Average Customer Lifetime Value x New Customers Acquired) / Cost of Marketing x 100%.
2. Leads X Retention
While absolute sales growth is important, marketing campaign success is often more about contributing leads that sales teams then turn into revenue. Hubspot has another good formula for determining the ROI of your marketing activity based on the leads provided, but you will need to liaise with sales or access sales data to finalise this. This uses the number of leads you gain, the proportion of leads to customers (easy to determine if you check your number of leads vs number of customers in a given period) and your average price across all your products.
The formula is: [((Number of leads x lead-to-customer rate x average sales price) – cost or ad spend) ÷ cost or ad spend] x 100.
But this is much easier to understand through Hubspot’s example:
“A company spends $1,000 on creating and placing ads. They receive eight clicks and six orders as a result. They calculate they’ll make around $2,000 for each new customer.
[((8 x 0.75 x $2,000) – $1,000) ÷ $1,000] x 100 = 1100%”
There’s no one-size-fits-all formula for marketing ROI. The most suitable approach depends on your specific marketing goals and the data you have on hand. Choosing metrics that accurately reflect your objectives is crucial for a meaningful ROI calculation. In fact, consider using a combination of these formulas to gain a well-rounded understanding of your marketing effectiveness. This way, you can paint a more complete picture of your marketing’s impact, whether it’s driving sales, building brand awareness, or nurturing customer relationships.
Challenges in Calculating Marketing ROI
While marketing ROI offers a powerful lens for evaluating marketing effectiveness, there are inherent challenges to consider.
Attribution
Long-Term and Indirect Effects
Sales Context
Comparing marketing performance requires a clear and consistent sales baseline. External factors like weather, seasonal trends, and economic conditions can impact sales and distort ROI calculations, so it’s essential to account for these variables to get a more accurate picture.
Measurement Challenges
Simplistic Metrics: Relying solely on immediate metrics like click-through rates or social shares can be misleading. A holistic view requires considering long-term impacts like brand awareness and customer loyalty.
Cross-Channel Complexity: Modern marketing spans multiple channels, making it difficult to attribute ROI to specific touchpoints.
Multiple Touchpoints: Customers often interact with multiple touchpoints before making a purchase, complicating attribution.
Outdated Attribution Models: Traditional attribution models often fail to capture the complex customer journey.
Calculating Marketing Expenses
Accurately determining marketing expenses is crucial for accurate ROI calculations. This includes not only direct ad spend but also costs like content creation, personnel time, and software subscriptions.
Overcoming these challenges requires a multifaceted approach, including advanced attribution modelling, careful data analysis, and a long-term perspective on marketing’s impact.
By addressing these complexities, marketers can gain a more accurate and comprehensive understanding of their marketing ROI.
How to Track ROI in Marketing
Once you have a formula that works well for your marketing activity and sales data, make sure you keep calculating this going forward. You can also backdate Marketing ROI by using previous data.
While several tools can specifically track Marketing ROI, these will usually supplement your existing tech stack, which is an additional expense and process that often isn’t worth it. The easiest way to track your Marketing ROI is through manual calculations, but you should also set up accurate revenue and conversion tracking in GA4, Hubspot or another CRM/lead management tool you use. Proper integrations between these tools in your tech stack will ensure that all results from your marketing activity are tracked around the clock.
