How to Calculate ROI on Marketing Campaigns

You spent $3,200 on Google Ads and generated $11,400 in revenue. That's a 256% ROI, right? No. That calculation ignores the cost of the products you sold. Once you subtract product costs, the real ROI is 132%. Still good, but half of what the simple formula suggested. This is the most common ROI mistake in digital marketing, and it leads to bad budget decisions.

Here's how to calculate marketing ROI correctly, with a channel comparison that might change where you spend your next dollar.

The Basic ROI Formula

ROI = (Revenue – Cost) ÷ Cost × 100

Simple calculation: ($11,400 – $3,200) ÷ $3,200 × 100 = 256% ROI.

Looks amazing. But it's misleading because it ignores the cost of the products she sold.

The Real ROI: Include Product Costs

Brianna's average product cost is 35% of revenue. On $11,400, that's $3,990 in product costs.

True profit: $11,400 – $3,990 (product) – $3,200 (ads) = $4,210

True ROI: $4,210 ÷ $3,200 × 100 = 132%

Still good. $1.32 in profit for every dollar on ads. But half of what the simple formula suggested.

What "Good" Marketing ROI Looks Like

ROI	Assessment	What It Means
Below 0%	Losing money	Campaign cost more than it generated
0–50%	Break-even to modest	Covering costs but thin margin
50–150%	Good	Solid return, worth scaling
150–300%	Excellent	Strong performer
300%+	Exceptional	Rare. verify the data

Brianna's Channel Comparison

Channel	Ad Spend	Revenue	Product Cost	Profit	ROI
Google Ads	$3,200	$11,400	$3,990	$4,210	132%
Instagram	$2,800	$7,600	$2,660	$2,140	76%
Email	$200	$4,200	$1,470	$2,530	1,265%

Email crushes everything because the audience already trusts her. Google outperforms Instagram because search intent is higher. Brianna shifted $1,000/month from Instagram to email list building.

Common Mistakes

• Counting revenue, not profit: Revenue-based ROI overstates results by ignoring product and fulfillment costs.
• Ignoring attribution windows: Someone who clicks an ad today might buy next week. Make sure you're comparing apples to apples.
• Not tracking lifetime value: Brianna's average customer buys 2.3 times. First-purchase ROI of 132% becomes 350%+ with repeat purchases.

Frequently Asked Questions

What is a good ROI for digital marketing?

100–200% is generally considered good for paid advertising. Email marketing often produces 300–500%+ because ongoing costs are lower.

How do I calculate ROI if I sell services?

Same formula but replace product cost with delivery cost (your time, contractor fees, software). ROI = (Revenue – Delivery cost – Ad spend) ÷ Ad spend × 100.

Should I include my time in ROI?

If you're deciding between spending time on marketing vs. other tasks, yes. Value your time at your hourly rate and add it to campaign cost.