The ROI in your example would be

=(5000-4000)/4000 = 25%

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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?

the error you're getting there, is in the way Excel handles percentages.
When you select Percentage format for a cell, Excel understands that to mean that 1.0  represents 100%.
Whereas if you were doing %'s using your own formula, (multiplying by 100 as the last action in the formula), then your 1.0 means 1.0 percent.

Hence you can't just click on the percent format willy nilly.

Deri

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?

I think you'll find that I clearly state "Taking 3 times marketing costs" when defining ROI. This effectively means that you are working with an average markup, and receiving/turning over an amount which should reflect profit. This post was also a reflection on the way analytics displays ROI.

It is obvious that I am stating revenue figures and not profit figures. No company I know of makes a 3 and half thousand percent profit! lol

I remember reading that 6 in every 10 pound spent in the UK is spent with Tesco in some shape or form. This is a particularly pivotal example of ROI from marketing and is indeed directly related to cart abandonment and lost sales. 1% of sales clawed back for any business is progressive.

Good to read your take, but I'm confident in my explanation since It exemplifies the way ROI is displayed via Google Analytics.

On 18:46:50 2 February 2007 DeriJones wrote:

bad and wrong.  ROI is based on profit  not revenue.

Example:
Mtg costs £500
Increased sales £10K

Sounds like a good numbers if you base 'ROI' on those

But - if your products are low margin - maybe the profit on the £10K sales was only £400.

So your business LOST money - £500 costs against £400 extra profits = £100 loss. Ouch.

Whereas if your £10K of sales was a high margin product - maybe you made £2K profit.

That's better: ROI is now clearly positive - 2K - 500 = 1500 net profit.
Same Mktg costs. Same revenue. Diferent results.

ROI must not use revenue, but profit (well direct margin is what the accountants might call it).

Wikipedia is your friend:
http://en.wikipedia.org/wiki/Return_on_Investment

Our clients get increased sales through using our services to find remove the invisible performance slow-downs and sporadic errors in their key shopping user Journeys  - and if we only had to show that the increased sales revenue covered our User Journey performance testing costs, it would make sales pitches a no brainer.
But it's often not hard to show that recovering 0.5 or 1% of lost sales this way will give the client a higher ROI on our services than they'd get on CPC etc, so sensible for the Mktg and ad-buyers to be thinking about it.
And if you're our client Tesco with £1B per annum of online sales... every fraction of a percent is worth having...

Deri

On 11:10:02 27 January 2007 AndrewSmith1 wrote:

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.