RETURN ON INVESTMENT [ROI]

http://www.adonaiadvertising.com

Definition of ROIROI is the measure of your profit that you havemade on Ads compared to your investment.It is calculated in percentages. Formula : ROI= Revenue- Total cost x100 Total cost

• Revenue = number of conversions x conversion value.

• Total cost= AdWords cost + Product cost• AdWords cost= clicks x average CPC• Product cost= Number of sales x Product value

Requirements for ROI

To calculate ROI first we need to measureconversions and total cost.Conversions: the conversion of a lead into sale is

conversion. By using conversion tracking code we can find out the conversions.

Total cost: The total amount spent on AdWords and products or maintenance is known as total cost.

WHY ROI?

• ROI plays a key role in determining the profits and estimate how specific are your advertising goals.

• ROI data adds to improve the performance of the less successful campaigns.

Steps in calculation of ROI

Conversion value is 7000rs and bid value is 100rs for every click. Every 10 clicks lead to one conversion.

Conversion rate :

Clicks ConversionsConversion Rate= (conversions/clicks) x 100

100 10 10%

Revenue:

Total cost:

Number of conversions Conversion value Revenue= No. of conversions x conversion value

10 7000 70000

Clicks CPC AdWords cost= clicks x CPC

Product cost Total cost= AdWords cost + Product cost

100 100 10000 0 10000

RETURN ON INVESTMENT :

Profit = 600 x 100 = 60000rs.

Revenue Total cost ROI= [(revenue-total cost)/total cost] x 100

70000 10000 600%

• Profit on each click:Profit Number of clicks Profit on each click=

Profit/ Number of clicks

60000 100 600

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