Your client’s product costs £50 to produce, and it sells for £150. She’s sold 10 units and spent £700 on her AdWords campaign. How would you calculate her return on investment (ROI) to help her understand the benefit of using AdWords?

  • [£1500 (revenue) – £1200 (cost + AdWords spend)] / £1200 (cost + AdWords spend)
  • [£150 (sales price) – £1500 (cost)] / £700 (AdWords spend)
  • £1500 (revenue) / £1200 (cost + AdWords spend)
  • [£1500 (revenue) – 10 (number of products sold)] / £1200 (cost + AdWords spend)

The correct answer is:

  • [£1500 (revenue) – £1200 (cost + AdWords spend)] / £1200 (cost + AdWords spend)

Explanation: ROI is the ratio of your net profit to your costs. To calculate ROI, take the revenue that resulted from your ads, subtract your overall costs, then divide by your overall costs: ROI = (Revenue – Cost of goods sold) / Cost of goods sold.

Read more here: https://support.google.com/adwords/answer/14090?hl=en