Question

You are the part-time marketing manager for a small chain of family-owned furniture stores. You just completed a back to school marketing promotion for a new line of student budget-friendly furniture and felt the sales were good. In addition to selling student furniture, your sales team told you that the parents of the students also purchased new furniture after visiting one of the store locations.

Calculate the Marketing Return on Investment using the following variables:

Revenue generated from the student furniture sales: $550,000

Additional revenue generated from other furniture sales, linked to student promotion: $250,000

Marketing costs included: $3000 in newspaper ads, $2500 in social media, $1000 prize for a chance to win the draw, that was offered to each student that enrolled this year at the local university. Plus you had to hire two younger sales people part-time to relate to student needs at a cost of $600 each.

Calculate the Marketing Return on Investment: (Express as a numerical value, two decimal places)

Answer 1

For the above question, lets assume that the total revenue generated (including the additional revenue generated from other furniture sales which happened only because parents of students came along to these stores) was purely a consequence of the marketing promotion.

Based on the above assumption, Marketing return on investment is calculated as:

Marketing ROI = (Total Revenue generated as a result of the promotion - Marketing costs incurred) / (Marketing costs incurred)

Total Revenue generated as a result of the promotion = $550,000 + $250,000 = $800,000

Marketing costs incurred = $3,000 + $2,500 + $1,000 + 2 x $600 = $7,700

Thus Marketing ROI = ($800,000 - $7,700) / ($7,700) = 102.90 (translates to 10,289.61% if expressed in percent).