“Return on Investment” or ROI is how AdCurve measures how much money you are making from your initial investment. Whenever you invest money into ads, you want to make sure that those are ads are bringing profit back to your shop.
AdCurve makes online marketing easy by providing you with the ROI for every ad and every channel. You can see which portion of your marketing spend isn’t adding any value, and increase your investment in the channels that are really driving profit to your shop. AdCurve does all the math for you so that you can focus on making use of the number.
How does AdCurve calculate ROI?
It might seem easy to calculate the return on advertising, but it is more complex than most people realize and involves a number of factors:
The profit from each individual order
Profit on an individual item you’ve sold is calculated by subtracting the floor price (link) from the sale price. To get the profit for an entire order, AdCurve performs this calculation for each individual item in the basket.
The return of each ad
Since most online orders are the result of interacting with multiple touch points and ads, you cannot determine the return based on a single ad. AdCurve uses a unique algorithm (link) to calculate the contribution of each touch-point along the Customer Journey (link).
Multiplying the contribution percentage by the order profit for each order the ad has contributed to allows us to calculate the total return from each individual ad.
The cost of each ad
AdCurve collects the costs of each ad directly from the channel. This is usually done with an API to ensure that the costs are exact and updated daily. If a particular channel does not support this feature, AdCurve will use your default cost settings for the channel.
ROI can then be calculated as the net return (Return of each Ad, minus ad costs) for each dollar spent on marketing.
Tips and ROI:
AdCurve provides you with dynamic tips to identify and help deactivate or change ads that have a negative ROI and are adding no value to your shop.
Keep in mind however that you cannot measure this based on just a few clicks or visits. For successful decision making and profitability AdCurve needs at least 100-150 visits on a specific ad or campaign to get an accurate measure.
Additionally, a small percentage of visits and conversions are not able to be measured properly. This can happen when customers use multiple devices, clear their cookies, or complete a purchase offline.
For shops that have an online and offline purchase, you will need to consider that some ads with negative ROI may not be driving any sales through your web-store, but could still be bringing in sales through your physical store.