You’ll be able to better measure the results of your advertising efforts if you look at the revenue increases, intangible benefits, direct expenses and opportunity costs related to a campaign. Starting with a simple math calculation that includes your hard costs and revenue increases will help you begin a more comprehensive analysis of your advertising programs.
Add the hard costs of your advertising spending. These includes the cost of media buys, contractors who handle your design, copywriting, media planning, online activities, printing and postage.
Determine the amount of corporate overhead -- so-called “soft costs” -- related to your advertising. This can include in-house marketing staff, IT employees who work on website ads and customer service people who handle phone calls and emails related to an ad campaign. It also can include the equipment needed for advertising staff.
Calculate the revenue increases you can directly attribute to your ad spending. Do this by tracking coupons, asking customers how they heard of you, reviewing website visitor traffic statistics to see where orders came from, and reviewing your sales numbers before, during and after the ad campaign dates.
Use the Return on Ad Spending formula if all you want is a mathematical calculation that gives you a percentage return. The formula is (Revenue/Spending) = Return On Ad Spend. If you generate $25,000 from a $10,000 ad spend, your calculation is 25,000/10,000 = 2.5. This means your revenues were 250 percent of your spend. Subtract 100 percent from that number -- your spend -- and you had a 150 percent profit return on your investment.
Tips & Warnings
- Write a list of the intangible benefits you get from your advertising, such as maintaining customer preference, increased website traffic or increasing product awareness. Analyze the success of your ad campaign by adding these benefits to the tangible returns you get.
- In addition, analyze your opportunity costs, which are projects you weren’t able to do because you used the money and staff time on the advertising campaign. Compare your opportunity costs to your return on investment to determine if an ad campaign was worth the effort.
- Photo Credit Design Pics/Design Pics/Getty Images
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