Successfully Calculate Your E-Commerce

You always want to invest money so that you get back more than you originally invested. However, if you don’t know how to properly estimate what it is that you are getting back, you might be missing out on revenue opportunities. Knowing how to properly calculate your return on investment also enables you to make smart decisions when it comes to investing your money.

To accurately calculate your ROI, you need to make sure you have taken the necessary steps to track all sales and conversions. There are two ROIs that will allow you to accurately evaluate how your campaigns are performing.

First, you can track direct sales, meaning that that the user goes to your website and makes a purchase, or a one-click sale. This is not an ideal way to track your sales because most users do not purchase right away. This will be your ROI No.1, which is calculated by finding the difference between the value of sales and the cost, and then dividing that by the cost, or (value of sale – cost)/cost.

In order to track sales that are indirect, you will need to tag your ads. This adds additional values in the URL that do not change the URL destination. They also allow you to see exactly what the user clicked on, such as an ad that led to your homepage, contact page or a specific product. On Facebook and Bing, you can add these as UTM parameters; Google uses auto-tagging.

Most advertisers think the Facebook pixel does this; however, the pixel only tracks direct sales and indirect sales within a short time period. If you were to go back to the website and purchase after a few hours, the UTM parameter would catch this, not the Facebook pixel.

Once you have tags in place, you will then be able to track assisted sales, which brings us to ROI No.2. Assisted sales are those who click your ad, go to your website, leave your website and buy later. For example, if you are shopping for a pair of shoes but leave the website to see if Amazon has a better deal, then go back to the brand website and purchase, this is an assisted sale and can only be tracked by UTM parameters.

Facebook tracks sales through the Facebook pixel. If Facebook tells you that you have eight sales and you go to Google and see you have five sales, then you have a difference of three. Those three conversions are assisted conversions. To see those and know where they came from, you need UTM parameters.

ROI No.2 includes your direct sales and assisted sales so that you have an accurate ROI calculation. It is calculated by adding your direct sales and assisted sales, subtracting the cost from that number, and dividing that difference by the cost, or ((direct sales + assisted sales) – cost)/cost. This is important when analyzing the bottom line of your business. Your ROI No.1 could be negative, leading you to think that you have a negative ROI, but when factoring in the ROI No.2, your business most likely has a positive ROI overall. With this in mind, it is important to know how to accurately optimize your ROI.

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