How to calculate your ROI for ad campaigns?
Putting together an ad campaign is no easy task; you've got to create great ideas and campaigns that tie into your brand's identity, and you need to ensure those ideas and campaigns get results. As exciting as launching an upcoming ad campaign can be, however, you'll need to ensure you grasp the purpose behind it and, most importantly, how you'll prove your return on investment (ROI).
A common bone of contention among marketing pros, ROI for your ad campaign can seem daunting to figure out. Luckily for you, we're here to demonstrate that calculating your ROI for your ad campaigns can be surprisingly straightforward.
What is your ad campaign ROI?
Real quick, let's define what your ad campaign ROI is: basically, it's the return on investment you'll get after running a specific ad campaign within a specific timeframe. There are plenty of handy ROI-tracking tools at your disposal, which are indispensable if you want to figure out what's working well (and what's not) when it comes to your ad campaign.
Keep in mind that not every component of your ad campaign exists to drive revenue. While it's true that most affiliate programs, for example, aim to drive sales (after all, affiliate marketing is one of the most effective strategies to earn passive income on the side), your program may be different. With that said, you'll need to understand how to calculate your ad campaign ROI if you do want to drive revenue.
Calculating your advertising campaign ROI
So, how do you calculate your ROI, anyway? It's simple when you just use the following formula: net income/cost of investment (multiplied by 100) = return on investment. You'll need investment and income figures to calculate your figure, and for your ad campaign ROI, you need to focus on the revenue your campaign generates.
Consider, for example, a company launching an ad campaign: they use an Amazon PPC agency and have their campaign focus on two different channels. They put a budget toward adverts on those channels, which is their investment -- let's call it an even $10,000.
The thing is, ascertaining the revenue they create is more complicated. After all, they need to separate leads and sales coming in from sources outside of their targeted channels, which they simply can't do without tracking tools. They'll need to rely on marketing attribution to link the sales they close in their CRM to their advertising campaign.
Now that our example company is working with marketing attribution, they can see that their campaigns - let's call them LinkedIn and Google Ads campaigns) generated a total of $30,000. With this figure, they can now calculate their ad campaign by taking the $30,000 they generated, dividing it by the $10,000 we mentioned they put toward their adverts earlier, and then multiplying by 100 for an ROI of 300%.
What advertising campaign ROI should you be aiming for?
In general, it's typically thought a solid ROI to aim for has a 5:1 ratio; exceptional advertising campaign ROIs can reach as high as ratios of 10:1. Conversely, advertising campaign ROIs that fall below a ratio of 2:1 aren't generally thought of as particularly profitable. This is mainly because, after you've considered additional organizational costs, companies aren't likely to break even.
Again, though, it's important to keep in mind that no two organizations are the same. You're guaranteed to experience ebbs and flows when it comes to your advertising campaign's ROI -- don't sweat it.
How else can you track your ad campaign’s performance?
There are additional methods you can rely on to track how well your ad campaign is performing. These methods typically apply to paid channel performance; while businesses can analyze this data by using tools such as Google Analytics, that data is typically pretty limited.
Consider PPC: businesses that aren't using marketing attribution won't be able to connect their customers back to an initial PPC session, leaving that session to go unattributed in a CRM. Extrapolate this fact to any of your site's other visitors, and you'll have a cloudy view of your campaign's performance at best.
Congratulations, you're now in a great place to begin tracking your ad campaign's ROI! We hope that this 101-style article has helped you understand how to go about tracking an individual ad campaign's performance. One last thing to mention: remember that you can make use of UTM tags to connect your content spread out across different channels by linking it. This allows you to track your campaign's performance across your different channels.