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Relationship between ROI and Daily Budget

Visitor ✭ ✭ ✭
# 1
Visitor ✭ ✭ ✭

Hi guys!

I hope you'll can help me sort out this confusion. 

I was researching on formulas to calculate ROI and its connection with daily budget.


According to the website below: 


It mentions about having an ROI goal initially to have more power over the budget, but what I don't understand is how can we predict ROI without having the number of units sold through advertising?


Should I initially test using a minimum daily budget of $10 for 2 weeks and then calculate ROI and accordingly change the budget?


The second option sounds more tempting but I'm unsure if the results will be accurate or money is being thrown away completely. How do Adwords specialists go about setting a daily budget when taken ROI into consideration?






Re: Relationship between ROI and Daily Budget

Explorer ✭ ✭ ☆
# 2
Explorer ✭ ✭ ☆
Hi Annette,

"Without having the number of units sold through advertising" however ROI has nothing to do with volume of units but the final revenue (gross or net).

Can you clarify that for me please?


Re: Relationship between ROI and Daily Budget

Visitor ✭ ✭ ✭
# 3
Visitor ✭ ✭ ✭
I'm using the below method to calculate the ROI which needs no. of units sold:

Marketing Investment :5000 A

Total Units sold 100
Price per unit 300
Total revenue 30000 B

Cost of goods per unit 100
Total COGS 10000 C
Gross Profit (B-C) 20000 D

Overhead allocation 2400 E
Incremental costs 5000 F

ROI (D-A-E-F)/A 152%

But I get what your trying to say. Can you please share your method for calculating ROI?
Is this the actual method used by marketers?

Kind regards,