ROI stands for Return On Investment. It is a measure of how much time and money you have invested and how much you earned as a result.

How to calculate ROI

ROI is calculated by taking the cost and dividing it by earnings. Overall ROI is your lifetime earnings divided by all the investment you have made. However, this is not always the most useful way to work out ROI.

Most marketers track the sales that result from a given campaign. That way, they can divide the value of the sales by the cost of the campaign. Hopefully, the number you get back is greater than £1 per £1 spent.

Using ROI

Let us take an example. Linda has a new website on which she places two landing pages. Each landing page is a signup form for her list. Linda tags each lead depending on if they came via landing page A or landing page B.

She runs a five-week Google Adwords campaign equally for both landing pages. At the end of the five weeks, she can see what the cost per lead (CPL) is for each page. The better performing page will be the one she uses the next campaign.

Next, she sends out a newsletter telling her list about her new ebook. She puts a tracking tag in each link depending on which page the list member signed up from. This way she can see how many sales she made from each source.

With this information, she can work out the ROI per page of her campaign. Maybe “page A” was more expensive per lead but generated leads more likely to buy than “page B”. In which case she will use page A because it resulted in more qualified leads.