Worked Example: Marketing Campaign ROI Calculation (5:1 ROAS Target)

Marketing ROI is one of the most misunderstood metrics in business. This walkthrough shows how to calculate the true ROI of a marketing campaign using the ROI calculator, including the often-confused difference between ROI and ROAS.

The Scenario

A small e-commerce company runs a Facebook ad campaign with these numbers:

• Ad spend (Facebook): $4,000
• Agency management fee: $1,500
• Internal labor (campaign setup, creative): $1,500
• Total investment: $7,000
• Revenue generated: $35,000

The marketing agency claims the campaign was a "huge success with 8.75x ROAS." Let's verify and calculate the true ROI.

Step 1: Calculate ROAS (Return on Ad Spend)

ROAS is the simplest marketing metric — it only considers ad spend, not total investment:

ROAS = Revenue / Ad Spend ROAS = $35,000 / $4,000 = 8.75x

The agency is technically correct on ROAS — but this number is misleading because it ignores the $3,000 in additional costs (agency + labor).

Step 2: Calculate Total Investment (True Cost)

Add all costs associated with the campaign:

Cost	Amount
Facebook ad spend	$4,000
Agency management fee	$1,500
Internal labor (creative + setup)	$1,500
Total investment	$7,000

Step 3: Calculate Profit

Profit = Revenue − Total Investment Profit = $35,000 − $7,000 = $28,000

Step 4: Calculate ROI (True Return on Investment)

ROI = (Profit / Total Investment) × 100 ROI = ($28,000 / $7,000) × 100 = 400%

This means for every $1 invested (including labor and agency), the campaign returned $4 in profit.

Step 5: Compare ROI to ROAS

Metric	Value	What it tells you
ROAS	8.75x	Revenue per ad dollar (ignores other costs)
ROI	400%	True profitability per total dollar invested

ROAS overstates performance by 2.2x in this scenario. Always use ROI for true profitability analysis.

Step 6: Compare to Industry Benchmarks

E-commerce marketing campaign benchmarks:

Channel	Typical ROAS	Typical ROI
Email marketing	36-40x	3,500-4,000%
SEO (long-term)	5-7x	400-600%
Google Search ads	4-6x	300-500%
Facebook ads	3-5x	200-400%
Display ads	1-3x	0-200%

Our campaign at 8.75x ROAS / 400% ROI is performing above the Facebook ad benchmark — genuinely a strong campaign.

Step 7: Calculate Break-Even ROAS

Break-even ROAS = 1 / Profit Margin (before ad spend). If the company's gross margin is 40%:

Break-even ROAS = 1 / 0.40 = 2.5x

Any campaign with ROAS above 2.5x is profitable (ignoring labor); below 2.5x loses money. Our 8.75x is well above break-even.

Step 8: Calculate Annualized Impact

If this campaign runs once per quarter (4x per year):

Quarterly profit: $28,000 Annual profit: $28,000 × 4 = $112,000

Annualized ROI stays at 400% (same ratio), but absolute profit is $112k — a meaningful number for a small business.

Step 9: Try It Yourself

Enter these numbers into the ROI calculator:

• Initial investment: $7,000
• Final value: $35,000
• Duration: 0.25 years (one quarter)

You should see:

• Total profit: $28,000
• Total ROI: 400%
• Annualized ROI: 1,466% (because it's compounded for one year)

Common Mistakes in Marketing ROI

1. Confusing ROAS with ROI — ROAS ignores labor, agency fees, and creative costs
2. Not attributing revenue correctly — last-click attribution over-credits the final touchpoint
3. Ignoring attribution window — Facebook ads often convert 7-28 days after the click
4. Forgetting customer lifetime value — a $35k campaign may produce customers who buy again
5. Not accounting for product cost — ROAS doesn't subtract COGS; ROI should

Advanced: Customer Lifetime Value (CLV) Impact

If the campaign acquired 100 new customers, and each customer has a 12-month CLV of $500:

CLV-based revenue: 100 × $500 = $50,000 (vs $35k initial) True ROI with CLV: ($50,000 − $7,000) / $7,000 = 614%

Many sophisticated marketers use CLV-adjusted ROI rather than first-purchase ROI.

Key Takeaways

• ROAS overstates performance by ignoring labor, agency, and creative costs
• ROI is the true profitability metric — use it for budget allocation decisions
• Break-even ROAS = 1 / Gross Margin — know this number before launching any campaign
• CLV-adjusted ROI is the most sophisticated metric for recurring-revenue businesses
• Marketing benchmarks vary widely by channel — don't compare Facebook ROAS to email ROAS

Related Calculators

• ROI Calculator — true ROI calculation
• Profit Margin Calculator — calculate break-even ROAS
• Gross Margin Calculator — gross margin for break-even calc
• Commission Calculator — for affiliate marketing commission
• Discount Calculator — for promotional pricing ROI