Free ROI Estimator: Understanding Advertising ROI

BusinessMarketingReturn on InvestmentAnalytics
Written By Shanelle Kennedy

Ever feel like you’re just throwing money into advertising without knowing if it’s really paying off?

Understanding your advertising ROI (Return on Investment) is key to knowing whether your marketing efforts are truly working.

In this post, we’ll break down what advertising ROI is, why it matters, and how it can help your business grow.

Plus, we’ve got a free ROI Estimator for you to download and use right away!

Click HERE to download our FREE Marketing ROI Estimator

What’s included in the Download:

  • Excel File Automatically calculates your Advertising ROI based on info you key in

  • Made up Example provided for reference

  • Guide on how to use the Spreadsheet

  • Handy Tips for Marketers

  • Fully Customisable - insert your company details & logo, use in presentations!

What is Advertising ROI?

So, what exactly is advertising ROI? It’s a performance metric that measures how much profit you’re making from your advertising compared to how much you’re spending from your marketing budget.

In simple terms, it shows you if your advertising is worth the money you’re putting into it.

Why is Advertising ROI Important?

  • Knowing What Works: ROI helps you see which ads are actually bringing in the dough. This way, you can focus on what works best for boosting your business.

  • Spend Smarter: By understanding your ROI, you can make sure your marketing budget is being spent wisely and not just doing down the drain.

  • Prove your Point: Have to justify your ad spend to your boss or partners? ROI gives you the numbers to back up your decisions.

  • Make Better Choices: Knowing your ROI helps you make smarter choices about where to put your advertising dollars in the future.

Here’s the basic formula:

ROI = (Net Profit from Campaign / Cost of Campaign ) x 100

But we’ve made it even easier for you with our free ROI Estimator.

It factors in total impressions, conversion rates, and average customer lifetime value to give you a comprehensive look at your unique position when it comes to your business’ advertising effectiveness.

Here’s how it works:

  1. Total Impressions x Conversion Rate: This tells you how many people actually converted (i.e. purchased) after seeing your ad.

  2. Conversions x Average Customer Lifetime Value (CLV): This gives you the total revenue generated from those conversions.

  3. Standard ROI Formula: ROI = ((Revenue from Campaign - Ad Spend) / Ad Spend) x 100.

Have we still got you? Math not mathing?

Photo: The Hangover, Warner Bros. Pictures

Don’t stress - Download our ROI Estimator which will do the calculations for you, so you can focus more on being an awesome business person.

But if you want to see how it works yourself, keep reading. We’re going to do a working example, to put this formular into action.

Say if you had 10,000 impressions with a conversion rate of 2% and your average customer lifetime value is $500, here’s how you’d calculate it:

Conversions = 10,000 x 0.02 = 200

Revenue = 200 x 500 = $100,000

If your ad spend was $10,000, then:

ROI = ((100,000-10,000) / 10,000) x 100 = 900%

If you get an ROI of 500% that’s a sign your marketing is probably paying off. If you get a negative ROI, that means you lost money on your advertising campaign.

How does understanding Advertising ROI Help your Business?

  1. Better Budgeting - put more money into the ads that are making your the most profit, whether it’s social media marketing, digital billboard marketing, or another channel. Stop wasting money on ads that aren’t performing well.

  2. Smarter Strategies - Repeat success by figuring out what’s working, and do more of it. Fine-tune your ads to reach the people who are most likely to act and convert.

  3. Boost your Profits - good ROI means more profit, plain and simple. Use your ROI data to scale up successful campaigns and keep growing.

  4. Data driven decisions: Use real data to make decisions so you’re not just guessing. Regularly checking your ROI helps you keep getting better and better at driving engagement and increasing conversion rates.

Conclusion

Getting a handle on your Advertising ROI is super important if you want to make sure your marketing efforts are paying off. With this knowledge, you can make smarter decisions, spend your money more wisely, and watch your business grow.

Ready to see how your ads are going?

Download our FREE ROI Estimator and start measuring your success today!

Download Our Free ROI Estimator

About the Estimator: Downloaded as an Excel file, this simple ROI estimator will automatically calculate your estimated ROI! Simply key in your details in the white cells.

A made-up business’ details have already been pre-filled for you to use as a reference and example.

A Guide on How to Use the Estimator, along with handy tips for Marketers, is also included in the Download.

Plus, customise the template with your logo, business name and other artwork, and use it in presentations!

This ROI Estimator is intended for estimation purposes only and does not supplement financial or business advice. The information provided is for informational purposes and does not constitute part of our service offering, but rather to assist you in understanding and improving your advertising efforts.




Shanelle Kennedy