Tom Duma

Follow This Formula to Calculate Return on Investment (ROI) in Marketing

This will give you a more accurate view of how successful given campaigns are.

Published

3 years ago

July 26, 2021

Tom Duma Instore August 2021 Issue

THESE DAYS, IT can be a challenge to decide how to spend those precious marketing dollars. You want to get the best return on investment (ROI) that you can. But what is a good ROI?

Here is a simple formula that you can use on all your ad spends. Determine your gross sales and estimate how much of those gross sales can be attributed to your ad campaign cost. Calculate your ROI by subtracting the cost of the campaign from total sales during the campaign, then divide that net sales figure by the cost of the campaign.

Here’s the formula:

(Total sales from event or during campaign) – (Cost of campaign) = (Net sales)

(Net sales) / (Cost of campaign) = ROI

Example: You spent $8,000 on your spring diamond bridal campaign and gross sales for your event were $35,000. $35,000 – $8,000 = $27,000 / $8,000 = 3.375 to one.

Everyone has a different breakeven in their store. Once you know that number, you will know what ROI you need in order to call that marketing campaign a success.

What is a good marketing ROI? According to most pundits, 5:1 is a good return on investment. At its most basic level, “good ROI” means that for every dollar put toward marketing, the business gets more than a dollar back.

ROI can be difficult to measure when it comes to social media marketing. You must place an ROI value in your formula that measures the value of brand awareness and brand identity. While perhaps those two may or may not convert at your POS, they are nevertheless what your ROI is when you do free social media posts. When you start spending marketing dollars on paid campaigns, paid search, paid display ads with a CTA (call to action) and retargeting, those will produce ROI in terms of conversion to sales that can be measured.

Every campaign will have different ROI definitions or benchmarks. For example, if your ad spend is on Google AdWords, then your ROI should measure website sales conversion and/or web traffic.

It’s important to note, however, that this formula makes the assumption that all sales growth is tied to marketing efforts. In order to generate a more realistic view of marketing impact and ROI, marketers should account for organic sales.

Start today to measure the precious dollars that you are spending on marketing. Create a spreadsheet and start tracking the ROI!

This Third-Generation Jeweler Was Ready for Retirement. He Called Wilkerson

Retirement is never easy, especially when it means the end to a business that was founded in 1884. But for Laura and Sam Sipe, it was time to put their own needs first. They decided to close J.C. Sipe Jewelers, one of Indianapolis’ most trusted names in fine jewelry, and call Wilkerson. “Laura and I decided the conditions were right,” says Sam. Wilkerson handled every detail in their going-out-of-business sale, from marketing to manning the sales floor. “The main goal was to sell our existing inventory that’s all paid for and turn that into cash for our retirement,” says Sam. “It’s been very, very productive.” Would they recommend Wilkerson to other jewelers who want to enjoy their golden years? Absolutely! “Call Wilkerson,” says Laura. “They can help you achieve your goals so you’ll be able to move into retirement comfortably.”