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Q: How is Marketing ROI (return on investment) Calculated?

How is Marketing ROI (Return On Investment) Calculated?

Marketing ROI (Return On Investment) is calculated as the ratio of incremental contribution to sales from a marketing channel divided by the spend in that marketing channel. This is the most common formula used to evaluate the return on investment of media dollars.

Incremental_sales = f(media_spend, raw_sales, other_parameters)

Once incremental sales is calculated for a tactic using one of the above techniques, the ROI for that tactic is calculated using the following formula.

ROI = (incremental_sales) / (media_spend)


ROI = (revenue - media_spend) / (media_spend)

Another commonly used marketing terminology similar to ROI is ROAS: Return On Ad Spend. The formula for ROAS: (revenue) / (media_spend)