Question 1What are the different ways to calculate return on investment (ROI)? Select all that apply.1 pointAdd the predicted sales growth to the revenue earned during the marketing campaign and then divide by the advertising cost.Use customer lifetime value, which is the average revenue generated per customer over a certain period of time. Subtract the marketing cost from the total sales growth during the period the campaign was run and then divide the result by the marketing cost.Calculate the revenue generated, divided by the amount spent on advertising during the campaign.
Question
Question 1What are the different ways to calculate return on investment (ROI)? Select all that apply.1 pointAdd the predicted sales growth to the revenue earned during the marketing campaign and then divide by the advertising cost.Use customer lifetime value, which is the average revenue generated per customer over a certain period of time. Subtract the marketing cost from the total sales growth during the period the campaign was run and then divide the result by the marketing cost.Calculate the revenue generated, divided by the amount spent on advertising during the campaign.
Solution
The different ways to calculate return on investment (ROI) are:
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Subtract the marketing cost from the total sales growth during the period the campaign was run and then divide the result by the marketing cost. This method calculates the net profit from the campaign and then determines what percentage of the marketing cost that profit represents.
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Use customer lifetime value, which is the average revenue generated per customer over a certain period of time. This method takes into account the long-term value of customers, not just the immediate sales from the campaign.
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Calculate the revenue generated, divided by the amount spent on advertising during the campaign. This is a straightforward calculation of ROI, where you simply divide the total revenue by the total cost.
The first option, adding the predicted sales growth to the revenue earned during the marketing campaign and then dividing by the advertising cost, is not a correct method for calculating ROI. This method would overstate the ROI by including predicted sales growth, which is not a guaranteed income.
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