The Marketing ROI Calculator – The Simple & Proven Formula for Calculating True Marketing Cost, Value and ROI
November 10, 2017 Leave a comment
Put Your Marketing Team & Your Marketers on Notice! Your company will start using this proven formula to measure true marketing ROI !!
Introducing…The Marketing ROI Calculator – The Simple & Proven Formula for Calculating True Marketing Cost, Value and ROI !!

Having trouble figuring out the value of your marketing efforts?

Need a proven formula to calculate true marketing ROI?

Want to continue marketing efforts that work and provide net income and abandon those efforts that are a net loss?

Seeking to implement an improved worldclass and six sigma marketing process to increase your marketing effectiveness while decreasing your marketing costs?
If you answered “yes” to any one of these questions, read the rest of this blog that delivers the true marketing ROI formula to help develop measured ROI driven marketing!
{Note: this is just one of many formulas variants I have developed for calculating marketing ROI and the actual one to implement will depend on the type of marketing you are performing}.
Before we get into the main marketing ROI formula, I want to point out a relevant quote and sentiment from John Wanamaker who was an American merchant, civic and political figure, considered by some to be a pioneer in advertising and marketing. To that end and related to this topic, John Wanamaker once had a famous quote to illustrate his frustration with the inability to determine if his marketing and advertising spend was truly effective and if it was producing the expected ROI. This famous quote is as follows:
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The following blog content is focused on introducing the proven formula, in use by some advanced marketing companies across the US, for calculating marketing and campaign ROI designed to drive sales orders. The marketing ROI formula will be broken down in sections and then by individual fields. We will cover how the formula is used, what internal sixsigma marketing processes need to be put in place to support the population of this formula and how each field is calculated or derived.
Introducing the Tried and True Full Marketing ROI Formula:
This formula consists of a prelaunch campaign section illustrated in yellow above and a postlaunch campaign section for the entry/update of actual campaign postlaunch effectiveness and ROI.
Let’s now review each section in detail as follows: PreLaunch ROI formula section:
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The first column of the prelaunch marketing ROI formula (“Campaign Number”) should be a uniquely identifiable campaign number or code being updated from your marketing automation system and the 2^{nd} column (“Campaign Description”) should be the main goal of the marketing campaign (Customer: acquisition, retention, upsell, crosssell, branding or awareness, urgent business alert of crisis communication, etc.).
The 3^{rd} column of the prelaunch marketing ROI formula (“Campaign Quantity”) is the campaign quantity being delivered to your customer audience (i.e. number of emails being delivered, mail, texts, etc.)
The 4^{th} column of the prelaunch marketing ROI formula (“Materials and Labor Cost”) is critical to the ROI formula and will likely require a few marketing process changes, as well as IT system changes. A true sixsigma structured process marketing environment will require your company to track all labor hours and materials cost associated with the planning, development and launching of any and all campaigns. This requires that you create a work breakdown structure (WBS) to appropriately track hours and materials associated with each campaign you conduct. By doing this you will finally have the fully loaded cost for each campaign such as creative hours spent, strategy planning time, cost of materials (for direct mail, outsourced text or email, etc.). The cost shown is the perunit cost to send the campaign or 34 cents for each delivered campaign item.
The 5^{th} column of the prelaunch marketing ROI formula (“Total Mktg. Cost”) is merely the unit cost expanded out to the total cost of the campaign (10,000 x. 34). If your delivered item is a single unit campaign quantity like web landing page, your campaign cost simply becomes the total labor hours used to develop this page and you can skip both columns 3 & 5.
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The 6^{th} and last column of the prelaunch marketing ROI formula (“Plan Campaign Dates”) is the expected campaign execution dates that the orders (shown in the post campaign section) will be tracked against this particular campaign.
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Let’s now review the last section of the marketing ROI formula in detail as follows: PostLaunch ROI formula section:
The first column is the actual campaign dates that the campaign executed in order to compare it to the planned campaign dates
To obtain the 2^{nd} column of the postlaunch marketing ROI formula (“# of Orders”) will require your company to develop the process of direct campaign attribution so that when customers order an item based on a campaign, those customers are incented to provide the campaign code (e.g. in exchange for a small discount) they viewed that drove them to order the item. By making this marketing process change, you have a direct way to track which campaigns drove which orders, by how much, etc. Car rental companies are excellent at this since every coupon is tracked with an encoded code such that they know exactly where the coupon was obtained, what campaign it was associated with, etc.
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The 3^{rd} column of the post launch marketing ROI formula (“Actual RR %”) is the redemption rate (RR) or simply the number of orders driven by the campaign, divided by the campaign quantity launched (column 3 of the prelaunch form).
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The 4^{th} column of the post launch marketing ROI formula (“Avg. Order Sold”) is the average order sold which is populated by your order system and is simply the total value of all orders divided by the number of orders. In this case the total of all orders is equal $2,175 (this becomes the 4^{th} column, “Bookings”) divided by 15 orders = $145 average per order.
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The 5^{th} column of the post launch marketing ROI formula (“Bookings $$”) is simply the number of orders multiplied by the average $ per order or, in this case, 15 orders x $145 per average order = $2,175.
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The 6^{th} column of the post launch marketing ROI formula is the Average Cost of Goods Sold (“COGS %”). In this case, the company has calculated that, historically, the cost of an average order is approximately 30% of an orders value. Another way to state this is that average margins are 70% and 30% is the cost to produce an order.
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The 7^{th} column of the post launch marketing ROI formula (“COGS $”) is simply the COGS sold percentage (30%) multiplied by the total bookings $$ value ($2,175 x 30%) = $652.50
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The 8^{th} column of the post launch marketing ROI formula (“Contribution $$”) is where we finally calculate the total ROI of the campaign via this simple 2 step process:

Add the cost of the labor to produce the campaign as calculated in column 5 of the prelaunch formula to the cost to produce the orders that the campaign specifically drove.

Subtract the total value of orders from #1 above.