Your Client’s Product Costs US$50 to Produce, and It Sells for US$150. She’s Sold 10 Units and Spent US$700 on Her Google Ads Campaign. how Would You Calculate Her Return on Investment (ROI) to Help Her Understand the Benefit of Using Google Ads?

Your client’s product costs US$50 to produce, and it sells for US$150. She’s sold 10 units and spent US$700 on her Google Ads campaign. How would you calculate her return on investment (ROI) to help her understand the benefit of using Google Ads?

  • [US$1500 (revenue) – US$1200 (cost + Google Ads spend)] / US$1200 (cost + Google Ads spend)
  • [US$150 (sales price) – US$1500 (cost)] / US$700 (Google Ads spend)
  • [US$1500 (revenue) – 10 (number of products sold)] / US$1200 (cost + Google Ads spend)
  • US$1500 (revenue) / US$1200 (cost + Google Ads spend)

Right Answer:

  • [US$1500 (revenue) – US$1200 (cost + Google Ads spend)] / US$1200 (cost + Google Ads spend)

Explanation: 

https://www.investopedia.com/terms/r/returnoninvestment.asp

Return on Investment is a performance measure which is used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments. It is also referred to as ROI in short form. It directly measures the amount of return on a particular investment.

For you to calculate the ROI for your investment, the benefit is divided by the cost of the investment which is expressed as a percentage or ratio.

  • ROI = (Gain from Investment – Cost of Investment) / Cost of Investment

ROI is a popular metric due to its integrity and versatility. ROI can also be used as a rudimentary gauge of an investment’s profitability if it is essential. There are several other new qualities of ROI which have been developed so far for particular purposes of advertisers.

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