ROI calculation

hi, Woolly, how are you?

What information are you trying to find out & how do you plan to use it?

Thanks a lot,

daniel

hi, Woolly,

in that case I think you're probably best off doing it based on profit vs costs. to do that, the formula you're using would work. it's probably just a case of missing brackets. It should really return a percentage rather than a £ figure, so:

ROI% = total profit - total costs / total costs x 100

if you clarify it with a couple of sets of brackets, looks like this:

ROI% = ( ( total profit - total costs) / total costs ) x 100

so, say you spend

• Google: £60
• MSN: £30
• Yahoo: £35

and your profit comes in at:

• Google: £100
• MSN: £50
• Yahoo: £60

You can run this through yoru ROI calculation to see which has benefitted you the most & where you should put more budget into. If you do that, you see:

• Google: 67%
• MSN: 67%
• Yahoo: 71%

So Yahoo is offering you a slightly greater return on your investment (you're getting your money back plus a further 71% on top of your investment).

As an ultra-simplistic example of how you might put this into excel:

1. Set up the columns: 'source', 'profit', 'cost' & 'ROI %'
   
2. Put the word 'Google' into cell A2
3. Put 100 (as in pounds) into cell B2
4. Put 60 into cell C2
   
5. Put the following formula into D2: =((B2-C2)/(C2))*100
6. Repeat that for all of your sources (or keyword groups, or whatever)
7. Column D should now show your ROI for each source/group

does that help at all? I know it's quite difficult to explain in text!

daniel

Personally I think any result which gives you at least a 300% ROI (Thats return on investment, hence we are talking about revenue, not profit). 300% percent would indicate that you are taking three times your marketing costs.

Currently our analytics shows that we have an ROI of between 2500% and 3500% (thats not a typo, three thousand five hundred), this fluctuates daily based on our ad spend and sales. The key to high ROI is to focus your adwords campaigns and remove wasted clicks. This is done by researching niche markets and looking at the "Long Tail" approach to PPC. Using phrase match and exact match keywords, successful landing pages... The list goes on and on!

However the real reason why ROI is so high depends upon organically generated sales. Because Google Analytics doesn't consider an organically driven or direct driven sale an investment then their are no marketing costs to offset against the revenue these clicks generate. Organically driven sales are obviously the key to creating a successful business so work on improving your ranking for the keywords which give you sales via PPC. You can then work on lowering your PPC spend on these keywords, as you begin to rank higher. Obviously getting high in SERPS does costs money, time and effort, but Google Analytics doesn't think so, hence you will see better ROI against marketing costs if you work towards the things I have mentioned.

Hope this helps.

Andrew - I'm just wondering if you are doing the calculation correctly in excel.

i.e. If I do the calculation below, where Z14 = 5000 and AA14 = 4000, I get a % of 25.0 - cell format  = number 1 dec place

=((Z14-AA14)/AA14)*100

If however I do the same calculation but then press the % icon this will result in 2500%

What do you think?

Sorry, that should be 3700% not 3500.

On 22:47:21 27 January 2007 AndrewSmith1 wrote:

 

ROI is calculated automatically in Google Analytics. I've never calculated any ROI figures myself since I don't have a need to.

ROI is calculated in the following way:

ROI is Return on Investment and is ((Revenue minus Cost) divided by Cost), expressed as a percentage.

EG: £19,000.00 - £500.00 / 500 = 3500% when expressed as a percentage.

Enter the following into excel:
=(19000-500)/500
And change the cell format to percentage.


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On 15:07:47 27 January 2007 Woolly wrote:

 

Andrew - I'm just wondering if you are doing the calculation correctly in excel.

i.e. If I do the calculation below, where Z14 = 5000 and AA14 = 4000, I get a % of 25.0 - cell format  = number 1 dec place

=((Z14-AA14)/AA14)*100

If however I do the same calculation but then press the % icon this will result in 2500%

What do you think?