The formula for calculating ROI is:
ROI = (Net Profit from Marketing Campaign - Cost of Marketing Campaign) / Cost of Marketing Campaign
Simply subtract the campaign's total cost from the revenue generated by the campaign, divide by the cost, and multiply by 100 to express it as a percentage.
Here are some tips for calculating the ROI of some of your various marketing campaigns:
Use Attribution Models: Attribution models help assign credit to various touchpoints in the user journey. For example, a customer may interact with multiple marketing channels (e.g., social media, email, push notifications, search ads) before making a purchase. Attribution models like first-touch, last-touch, or multi-touch attribution can provide a more accurate view of how each channel contributes to conversions.
In the Last-Touch Attribution Model, all credit for a sale goes to the last marketing interaction that directly led to the purchase. For example, if a customer made a purchase after receiving an email, the entire credit is attributed to the email campaign, even though the customer may have interacted with other marketing channels earlier in their journey. This model is straightforward but may not capture the full impact of all marketing touchpoints. Mapping your unique user journey is a great way to better understand your touchpoints and evaluate how you can make them more effective.
Include Both Direct and Indirect Costs: In addition to direct campaign costs, consider indirect costs that might not be immediately apparent. These can include salaries of marketing team members, software subscriptions, and overhead costs associated with campaign execution. Accounting for all relevant expenses ensures a more comprehensive ROI calculation.
Segment Your Data: Analyze ROI for different segments of your audience or various marketing campaigns separately. This allows you to identify which user segments or campaigns are performing better and where optimizations are needed. For example, you can segment your audience by demographics, like age or location, to identify which groups are generating the highest ROI. For example, if you discover that customers aged 18-24 have a significantly better ROI than other age groups, you can allocate more resources to target that specific segment with personalized marketing strategies.
Calculate User Lifetime Value (LTV): User lifetime value is the total revenue a user is expected to generate over their entire relationship with your business. Understanding LTV can provide valuable insights into the long-term impact of your marketing efforts and help you prioritize customer retention strategies.
Using LTV to calculate how much value a newly acquired user brings to your app gives you helpful direction for how much you should spend on acquisition costs.
Here’s how to calculate user LTV:
Average monthly revenue per customer / Monthly churn
For example, your average user generates $2.30 per month and you have a monthly churn rate of 70%. Using Formula #2 ($2.30 / .70) we arrive at the value of $3.29, or your average user lifetime value. You also now know that you should not be paying more than $3.29 to acquire a new user.
For a deeper dive into everything LTV, read our guide on understanding mobile user lifetime value!
Implement Marketing Analytics Tools: Marketing analytics tools and platforms can automate data collection and analysis, making it easier to track and calculate ROI accurately. These tools often provide real-time data and visualization options, simplifying the process.
For mobile marketing specifically, it can be difficult (or nearly impossible) to figure out what the outcome of a specific message is. OneSginal provides an industry-leading message analytics platform that easily quantifies which messages are driving engagement and sales so you can maximize your mobile marketing ROI. From confirming deliveries by device to tracking user-level data with a robust analytics API, OneSignal takes pride in letting the data do the driving.