The core purpose of any business is to make money, so when a business spends money, the business expects to make more money(profits) in return. Advertising is exactly the same. A business spends money on advertising with the expectations that the advertisements will bring in enough money to pay for themselves to keep running. The return on investment on any advert is just a matter of knowing the cost of advertisement and the extra money it brought in to the business through more sales. In this article, Business-Matter.com shows you how the 3 ways to calculate the percentage of return on advertising
1. First of all sum up the total cost of the advertisement, including the cost of creating it and the cost of publishing it. For example, you may have spent N100,000 to have your ad created, and N900,000 to place it in a magazine(E.g. Business-Matter.com Magazine)
Calculate the extra profit by multiplying the profit of each item by the number sold through the advertisement. For example, if you are selling products that profit N5000 per sale, and the advertisement brings in 1,000 extra customers who all buy one product each, then you would multiply N5000 x 1,000 customers = N5,000,000.
Find the percentage of return by calculating the profit from Step 2 as a percentage of the total cost from Step 1. For example, if you spent N1,000,000 total on the ad, and make N500,000 profit from it, then you’d calculate:
(x/100)(1,000,000) = 5,000,000
x = 500
So in the example, the percentage return on the advertisement is 500 percent.