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How to know the ROI of a campaign?

[ Edited ]
Visitor ✭ ✭ ✭
# 1
Visitor ✭ ✭ ✭

Hello Marketers, 

I have a question regrades the ROI of a campaign. If i have a campaign with a CPA of 60$. and in Analytics, i have seen that the average order value (AOV) for this campaign is 437$. So what the ROI of this campaign and what is the used formulas to know the ROI.

 

In AdWords Support, i have crossed by this example:

Let's say you have a product that costs $100 to produce, and sells for $200. You sell 6 of these products as a result of advertising them on AdWords, so your total cost is $600 and your total sales is $1200. Let's say your AdWords costs are $200, for a total cost of $800. Your ROI is:

    ($1200 - $800) / $800

    = $400 / $800

    = 50%

But i was totally lost when it mentioned "Let's say your AdWords costs are $200" so $200 for what exactly ??

 

 

 

looking forward to know this Smiley Happy and thanks for your help mates 

2 Expert replyverified_user
1 ACCEPTED SOLUTION

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Marked as Best Answer.
Solution
Accepted by topic author Hossam H
September 2015

Re: How to know the ROI of a campaign?

[ Edited ]
Follower ✭ ✭ ✭
# 8
Follower ✭ ✭ ✭

Hi Hossam,

The role of AOV is basically how much you have gained in terms of revenue. In your case your AOV is 437$ per order (this is basically revenue) & your cost of investment will be (60$ which is the adwords cost to gain that conversion + cost of production for that product).
ROI = (437 - total Cost)/ Total Cost
In Google's example $200 is for the adwords advertising cost.

Hope this helps!

Cheers!
Rinkal

View solution in original post

Re: How to know the ROI of a campaign?

Top Contributor
# 2
Top Contributor
What the the $200.00 example is referring to is the cost associated with your advertising i.e. the budget you had to spend or the cost per acquisition in your case.

In your case your cost is $60.00 CPA + whatever the cost is to produce the product. To properly calculate ROI you need to account for both the cost of the product production and the spend associated with the marketing efforts.

Hope that helps.
Kim


Kim Clink, AdWords Top Contributor | Community Profile | Twitter | Clink Digital Marketing
Did you find any helpful responses or answers to your query? If yes, please mark it as the 'Best Answer.'

Re: How to know the ROI of a campaign?

Follower ✭ ✭ ✭
# 3
Follower ✭ ✭ ✭

Hi Hossam,

 

To calculate the ROI, the formula is very simple:

 

Return On Investment (ROI)

 

Hope this helps!

 

Cheers,

Rinkal

Re: How to know the ROI of a campaign?

Visitor ✭ ✭ ✭
# 4
Visitor ✭ ✭ ✭
Hello Kim,

Thanks for your answer, everything is going to be clear for me if i only knew what is the (Average Order Value) and what AOV has to do in my example? Smiley Happy
thanks

Re: How to know the ROI of a campaign?

Visitor ✭ ✭ ✭
# 5
Visitor ✭ ✭ ✭
Hey Rinkal,

Thanks for your help. The formula of ROI i knew it but in my example there is a new component which is (AOV) .. I just want to know its role Smiley Happy

thanks again

Re: How to know the ROI of a campaign?

Top Contributor
# 6
Top Contributor

aov = total conversion value / conversions

for example --
aov = total sales revenue / total number of sales

Re: How to know the ROI of a campaign?

Visitor ✭ ✭ ✭
# 7
Visitor ✭ ✭ ✭
Hi Celebird,

Thanks for that. So we have the total sales revenue but we don't have the number of sales. Should i imagine a number in this case ?
Marked as Best Answer.
Solution
Accepted by topic author Hossam H
September 2015

Re: How to know the ROI of a campaign?

[ Edited ]
Follower ✭ ✭ ✭
# 8
Follower ✭ ✭ ✭

Hi Hossam,

The role of AOV is basically how much you have gained in terms of revenue. In your case your AOV is 437$ per order (this is basically revenue) & your cost of investment will be (60$ which is the adwords cost to gain that conversion + cost of production for that product).
ROI = (437 - total Cost)/ Total Cost
In Google's example $200 is for the adwords advertising cost.

Hope this helps!

Cheers!
Rinkal

Re: How to know the ROI of a campaign?

Visitor ✭ ✭ ✭
# 9
Visitor ✭ ✭ ✭
Thanks so much Rinka, that's what i have been looking for Smiley Happy