importance of return on investment(roi) in adwords | adonai advertising
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RETURN ON INVESTMENT [ROI]
http://www.adonaiadvertising.com
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Definition of ROIROI is the measure of your profit that you havemade on Ads compared to your investment.It is calculated in percentages. Formula : ROI= Revenue- Total cost x100 Total cost
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• Revenue = number of conversions x conversion value.
• Total cost= AdWords cost + Product cost• AdWords cost= clicks x average CPC• Product cost= Number of sales x Product value
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Requirements for ROI
To calculate ROI first we need to measureconversions and total cost.Conversions: the conversion of a lead into sale is
conversion. By using conversion tracking code we can find out the conversions.
Total cost: The total amount spent on AdWords and products or maintenance is known as total cost.
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WHY ROI?
• ROI plays a key role in determining the profits and estimate how specific are your advertising goals.
• ROI data adds to improve the performance of the less successful campaigns.
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Steps in calculation of ROI
Conversion value is 7000rs and bid value is 100rs for every click. Every 10 clicks lead to one conversion.
Conversion rate :
Clicks ConversionsConversion Rate= (conversions/clicks) x 100
100 10 10%
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Revenue:
Total cost:
Number of conversions Conversion value Revenue= No. of conversions x conversion value
10 7000 70000
Clicks CPC AdWords cost= clicks x CPC
Product cost Total cost= AdWords cost + Product cost
100 100 10000 0 10000
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RETURN ON INVESTMENT :
Profit = 600 x 100 = 60000rs.
Revenue Total cost ROI= [(revenue-total cost)/total cost] x 100
70000 10000 600%
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• Profit on each click:Profit Number of clicks Profit on each click=
Profit/ Number of clicks
60000 100 600
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