A Tool to Estimate Campaign ROI

As a product manager or product marketing manager, you often participate in marketing campaign and promotion planning as a key stakeholder. It is very important to be able to estimate your return on investment for a campaign idea quickly but also accurately. In this article you will learn how this can be done using a simple ROI estimator that you can download and customize for your own needs. It takes into account data that are sometimes missed by “traditional” ROI models, for example campaign management costs, varying levels of product profitability, shipping costs, currency exchange rates.

You can download the campaign ROI estimator here. It reflects the following scenario: a content site has approached you with a proposal to put together a product bundle for their members and advertise this bundle on their site, through their Facebook account and other communication channels. You believe this will work if you combine three paid products, each discounted by 10%, with free samples of two other products. You estimate that you will achieve at least 40 orders but no more than 200 orders. Before you go ahead with the campaign, you want to know the expected ROI range taking into account product gross margins plus external and internal costs of the campaign itself. And to make things a bit more complicated, your business is based in New Zealand but your new partner – and new customers – will be based in the U.S. The spreadsheet for estimating the ROI includes some numbers that will not change often and can be assumed to be the same for each campaign (you can still change them when you need it, of course):

  • Average Hourly Cost Per Employee: takes into account everyone who is on the immediate campaign team and whose time needs to be accounted for
  • Lifetime Value Adjustment: takes into account repeat purchases from new customers
  • Cost of Goods Sold Adjustment: a multiplier of COGS that you believe is relevant for this campaign (if not sure, use the value of 1, meaning no adjustments)
  • Internal Pick and Pack Cost Per Unit: this number can be obtained by analysing how many units your warehouse team picks and packs per year and what the costs are
  • Average Shipping Cost Per Parcel: this is self-explanatory
  • USD Exchange Rate: this is self-explanatory too but may need to be changed more often than the above parameters

It will take you an effort to work out the numbers listed above but you only need to do it once and update from time. For each campaign, you need to enter the following into the estimator:

  • Data about the products in the bundle (how many units, production costs, retail prices, discounts)
  • An estimate of how many hours of your team’s time will be required to set up and run the campaign
  • All external costs (advertising, contractors, purchased assets)
  • Sales estimates for worst and best case

Once you’ve done this, you will immediately see the ROI range for your campaign. This will help you make a decision on this particular idea and how it compared with other ideas very quickly but sufficiently accurately.

Click here to download the campaign ROI estimator.