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Is Your Marketing Investment Generating a Return?
Measure the estimated financial return from a marketing initiative, find the revenue you need to break even, and model how changes in attributed revenue, gross margin, and cost affect profitability.
Campaign costs and other relevant marketing costs.
Revenue reasonably attributed to this marketing in the same period.
A label only. Changing it doesn't change your numbers.
Starting values are examples, not benchmarks. Replace them with your own numbers.
Estimated marketing ROI
80%
based on gross profit, not revenue
Attributed gross profit
$18,000
Estimated net marketing contribution
$8,000
Revenue-to-marketing-spend ratio
3.0×
Break-even attributed revenue
$16,667
to recover $10,000 at 60% margin
ROI at different attributed revenue levels
Same investment of $10,000 and 60% gross margin.
| Attributed revenue | Gross profit | Net contribution | ROI |
|---|---|---|---|
| $15,000 | $9,000 | −$1,000 | −10% |
| $22,500 | $13,500 | $3,500 | 35% |
| $30,000 (yours) | $18,000 | $8,000 | 80% |
| $37,500 | $22,500 | $12,500 | 125% |
| $45,000 | $27,000 | $17,000 | 170% |
| $60,000 | $36,000 | $26,000 | 260% |
What marketing ROI measures
Marketing ROI helps estimate whether the gross profit generated by a marketing initiative exceeds its cost. It differs from revenue-based ROAS because it incorporates gross margin: $30,000 of revenue at a 60% margin is $18,000 of gross profit, and that's what has to cover the marketing spend.
The formulas
- Attributed gross profit = attributed revenue × gross margin.
- Estimated net marketing contribution = attributed gross profit − marketing investment.
- Marketing ROI = (attributed gross profit − marketing investment) ÷ marketing investment × 100.
- Revenue-to-marketing-spend ratio = attributed revenue ÷ marketing investment. It's called ROAS only when the whole investment is advertising spend.
- Break-even revenue = marketing investment ÷ gross margin.
A worked example
With a $10,000 investment, $30,000 of attributed revenue, and a 60% gross margin: gross profit is $18,000, net contribution is $8,000, marketing ROI is 80%, and the revenue-to-spend ratio is 3.0×. You would need $16,667 of attributed revenue just to break even.
Assumptions to keep in mind
This is an estimated marketing contribution ROI, not a complete accounting measure of profitability. Results depend on accurate attribution, appropriate expense allocation, revenue recognition, and the chosen measurement period. Attributed revenue is not necessarily incremental revenue caused by the campaign: some of those customers might have bought anyway.
Need help turning these numbers into a growth strategy?
Calculators can help you understand the numbers. Building a repeatable growth engine requires the right strategy, positioning, execution, and measurement. Robert Gilbreath works with founders and leadership teams to develop practical go-to-market and marketing growth programs.
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