How to Calculate Advertising ROI: Complete Guide with Formulas

Master advertising ROI calculation with our comprehensive guide. Learn different ROI formulas, understand ROAS vs ROI, and discover industry benchmarks to measure your campaign success.
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200.00%
ROI
3.00:1
ROAS
$20.00
CPA
Essential ROI Formulas

1. Basic ROI Formula

ROI = ((Revenue - Ad Spend) / Ad Spend) × 100%

Measures net profit as a percentage of investment

2. ROAS Formula

ROAS = Revenue / Ad Spend

Shows revenue generated per dollar spent (e.g., 3:1 = $3 revenue per $1 spent)

3. True ROI Formula (Including All Costs)

True ROI = ((Revenue - Total Costs) / Total Costs) × 100%

Total Costs = Ad Spend + Agency Fees + Creative Costs + Tools + Labor

4. Customer Lifetime Value ROI

LTV ROI = ((CLV × Customers - Ad Spend) / Ad Spend) × 100%

Accounts for long-term customer value, not just initial purchase

Common ROI Calculation Mistakes

Ignoring Hidden Costs

Not including agency fees, creative costs, or labor

Short-term Focus

Measuring only immediate purchases, not LTV

Wrong Attribution

Crediting wrong channels for conversions

Include All Costs

Track every expense related to campaigns

Measure LTV

Track customer value over 6-12 months

Test Attribution Models

Use multiple models to understand impact

Your ROI Optimization Action Plan
1

Set Up Proper Tracking

Implement conversion tracking, UTM parameters, and analytics

2

Calculate Your Baseline

Measure current ROI/ROAS across all channels

3

Include All Costs

Add hidden costs for true ROI calculation

4

Implement LTV Tracking

Set up cohort analysis for long-term value

5

Optimize Continuously

Test, measure, and improve based on data

Related Tools & Resources

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