For dollars spent on advertising -
What dollars of sales produced?
To determine the dollars of sales produced from dollars spent on advertising, you need to calculate the Return on Advertising Spend (ROAS). ROAS is a ratio that measures the revenue generated by advertising campaigns compared to the costs incurred.
To compute the ROAS, follow these steps:
Step 1: Determine the revenue generated from the advertising campaign. This can be obtained by tracking the sales specifically attributed to the advertising efforts. Ensure that you only consider sales directly resulting from the advertising campaign being evaluated.
Step 2: Calculate the advertising costs. Include all expenses related to the advertising campaign, such as media buying, creative production, agency fees, and any other associated costs.
Step 3: Divide the revenue generated (Step 1) by the advertising costs (Step 2). The resulting figure is the ROAS.
For example, if the revenue generated from advertising is $100,000 and the advertising costs are $20,000, the ROAS would be calculated as:
ROAS = Revenue / Advertising Costs
ROAS = $100,000 / $20,000
ROAS = 5
The ROAS of 5 means that for every dollar spent on advertising, $5 of sales were produced.