Step #1: Track your lead count and ad spend.
Calculate how many leads your campaign generated and the total ad spend.
This step sets the baseline for your ROI calculation. Monitoring these figures gives you an excellent high-level view of how many new email subscribers you're getting and what it costs to get them.
For example, imagine you launched a Facebook Ad campaign to promote an eBook. Over the course of the campaign, you spent a total of $1,000 on ads. The campaign resulted in 250 leads. Keeping track of both figures is crucial because it establishes the fundamental cost-per-lead, which is calculated as $1,000 divided by 250 leads, resulting in a cost of $4 per lead.
Step #2: Measure conversion and revenue.
Next, determine how many leads turned into paying customers and the total revenue they generated.
This data is crucial; it highlights the effectiveness of your lead nurturing and sales processes. Implementing strong tracking systems here can help avoid the error of attributing revenue to the wrong sources.
Continuing the example from step 1, out of the 250 leads generated, let's say 10% converted into customers purchasing a $200 service. This results in 25 new customers. The total revenue generated from these customers would be 25 multiplied by $200, equaling $5,000. This step is crucial for understanding which ads are not only generating leads but also converting those leads into substantial revenue.
Step #3: Calculate your overall ROI.
Finally, subtract your total ad spend from the revenue generated, divide this number by the ad spend, and multiply by 100 to get your ROI percentage. This formula gives you a clear measure of your ad campaign's profitability.
In our example, you subtract the $1,000 spent on ads from the $5,000 earned from customer purchases. This results in a $4,000 profit. Next, you compare this profit to the initial ad spend to assess the efficiency of the investment. In this scenario, the ad campaign returned four times the amount spent, indicating a highly effective use of funds in attracting and converting customers through Facebook Ads.
This clear metric helps evaluate the true profitability of your marketing efforts.