The question is quite logical and every CEO who spends money on marketing campaigns should know the answer to it, but the truth is completely different. Most marketing directors or CEOs do not even know whether campaigns are profitable, and most do not even know how much the campaigns should earn in order to achieve a positive return on investment (ROI).

If you are one of them, it’s time to find out this information or Marketing will continue to be just a cost, not an investment.

In order to even theoretically know whether you are achieving a positive return on investment in marketing campaigns, some conditions need to be met.

If you do not have the Google Analytics tool set up on your webstore or website, you can never know how your campaigns are performing. Without data, there is no analysis, and without analysis, there is no quality strategy.

In addition, it’s necessary to set up and monitor the goals that are important to you. In the case of a webstore, this will be tracking the number of orders and sales revenue. Without these two pieces of data, there is no chance of knowing whether the campaigns are bringing in a positive ROI.

With classic websites where the goal is leads, it’s necessary to monitor the filling out of the contact form on the web and phone calls. In this case, it is a little more difficult to determine how much “earnings” or income each lead brings you, but there are methods to set it up properly.

ROAS (Return on ad spent) refers to the data on how much you earned from the invested budget, taking into account only marketing costs without other business costs. For example if the campaign earns you 3,000 euros on your web store, and you invested 1,000 euros in it, the ROAS is 3. It is certainly a positive number, but it does not necessarily mean that the campaign is profitable, i.e. that the ROI is also positive.

ROI (Return on investment) shows how much you really earned, taking into account all business costs (price of goods, storage, employee wages, utilities…), not just marketing costs. For example, if your campaign earned you 3,000 euros in revenue, and the cost of goods, marketing and all other costs for products sold is 1,500 euros, in this case the ROI is 2.

If you don’t know where your Break even point is, you have no chance of making quality and thoughtful decisions related to marketing campaigns. You can’t rely on your “feeling” that campaigns are working or not working well.

To know where your break even point is, use a simple formula:

If your margin on a certain product is 20%, divide 1 by 0.2 and you will get the number 5. This means that you have to earn 5 euros for every euro invested in marketing to be even. Anything above 5 is a profit (e.g. 5.01), and anything below is a loss (e.g. 4.99).

The calculation is basically very simple if you know the profit margins of products and/or services. Sometimes they are not easy to determine and it takes a lot of time and effort, but in the end it’s definitely worth knowing what our break-even point is.