How to Calculate the ROI

When a client decides to invest in an Adwords CPC (cost per click) campaign after consulting with an Online Marketing Agency, they expect to see an increase in traffic to their website, sales and profit. ROI (return on investment) is one of the key indicators that illustrate the success of the campaign.

Google Analytics specifies the ROI of each keyword, but to calculate the real return on investment it is important to know how to interpret the ROI figure. If it is 0% that means you earnt as much as you invested, if it is 100% your return is double that of your investment.

Depending on the type of online business you have, the numbers can be very encouraging, showing returns of 1000% for example. But this is not necessarily your net profit, because you need to deduct the cost of production and any investments made in the product or business to see the real ROI.

For example, if you invested 100 € in a CPC campaign with the phrase “designer handbags online” and as a result make 4 sales worth 300 € each, total sales would equal 1200 €, and the ROI would be 1100%. However, from the 1200 € you have to deduct the cost of buying or manufacturing the bag, and the cost of the personnel involved in the manufacture or sale of the bag. If these costs add up to a total of 120 € per bag, the real profit is 180 € per sale. 180 x 4 = 720 €, therefore the real ROI is 620%.

The correct interpretation of ROI helps to measure the success of a CPC campaign. With the help of a professional Online Marketing Agency to design and develop an interactive online store , you will see the percentages convert into real profit for your online business.

Débora De Sá

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