**SEO title:** Digital Marketing ROI Formula (With Examples) — 2026
**Meta description:** The exact ROI formula agencies use to track digital marketing. Worked examples, attribution models, and the 3 metrics that matter.
## If you can’t calculate the ROI of your marketing in under five minutes, you don’t have a marketing function. You have a spending habit.
Every business owner I meet says they “track marketing ROI.” Then I ask them what their cost per qualified lead was last quarter and they freeze. Or they tell me ROAS (return on ad spend) and call it ROI. ROAS isn’t ROI. ROAS is gross revenue divided by ad cost — it ignores margin, fulfilment cost, refund rate, and lifetime value.
True ROI on digital marketing is one of the simplest calculations in business. This article gives you the exact formula, three worked examples across different business types, and the attribution model we use to assign credit between channels.
By Josh Weir, founder of Weir Digital Media.
## Quick Answer (100 words)
Digital marketing ROI = (Net profit attributed to marketing − Marketing investment) ÷ Marketing investment × 100. Net profit must use contribution margin, not revenue. Marketing investment includes media spend, agency fees, software, and internal time. The benchmark for healthy digital marketing is 3:1 ROI minimum, 5:1 target, 10:1 elite. Attribution models matter: last-click undercounts top-of-funnel, first-click undercounts bottom-of-funnel, position-based (40-20-40) is the most defensible. Track ROI at the channel level, not aggregate. The single biggest mistake businesses make is using revenue instead of contribution margin — it inflates apparent ROI by 60-80%.
## The formula
“`
ROI = ((Net Profit − Marketing Investment) / Marketing Investment) × 100
“`
Where:
– **Net Profit** = Revenue from marketing-attributed sales × contribution margin
– **Marketing Investment** = All-in cost (media + fees + tools + time)
That’s it. Everything else is implementation detail.
## The three numbers most businesses get wrong
### 1. They use revenue instead of contribution margin
Revenue is the wrong numerator. If you sell a £1,000 service with a 30% contribution margin, the £1,000 generates £300 of contribution, not £1,000. Marketing ROI on the £1,000 revenue figure inflates the actual result by 233%.
**Contribution margin** = Revenue − Cost of Goods Sold − Variable Selling Costs.
For services: contribution margin is typically 50-80%.
For e-commerce: 25-60%.
For SaaS: 70-90% after fulfilment.
### 2. They forget the time cost
If you run a 10-person marketing team and your CMO earns £80,000, that’s marketing investment too. Add internal salaries (loaded with NI + pension) to the denominator.
The full marketing investment for a typical UK SME breaks down as:
– Paid media: 40-60%
– Agency fees: 15-30%
– Tools/software: 5-10%
– Internal salaries: 20-40%
– Content production: 5-15%
If you’re only counting media spend, your ROI is overstated by 50-100%.
### 3. They use the wrong attribution model
The same £10,000 in revenue can show wildly different ROI depending on which channel gets credit. The four common attribution models:
– **First-click:** All credit to the first touchpoint. Favours top-of-funnel.
– **Last-click:** All credit to the closing touchpoint. Favours bottom-of-funnel.
– **Linear:** Equal credit to every touchpoint. Easy but fictional.
– **Position-based (40-20-40):** 40% to first, 40% to last, 20% split across middle. The most defensible.
– **Data-driven (Markov, Shapley):** Algorithmic credit assignment. Needs 600+ conversions/month minimum.
We default to position-based for clients under 600 conversions per month and data-driven above that threshold.
## Worked example 1: B2B service business
**Scenario:** Bournemouth-based accountancy firm. Average client value £2,400/year. Average client lifespan 4 years. LTV = £9,600. Contribution margin 65%. LTV contribution = £6,240.
**Q1 marketing investment:**
– Google Ads: £4,500
– LinkedIn Ads: £1,800
– Agency retainer: £3,000
– Tools (HubSpot, Ahrefs): £600
– 0.4 FTE internal marketing: £6,000
– **Total: £15,900**
**Q1 results:**
– 18 new clients attributed to marketing
– Revenue Year 1: 18 × £2,400 = £43,200
– LTV revenue: 18 × £9,600 = £172,800
– LTV contribution: 18 × £6,240 = £112,320
**ROI calculations:**
– Year 1 revenue ROI (wrong): (£43,200 − £15,900) / £15,900 = **172%**
– Year 1 contribution ROI: (£28,080 − £15,900) / £15,900 = **77%**
– LTV contribution ROI: (£112,320 − £15,900) / £15,900 = **606%**
The “right” number depends on the question. If the question is “did this quarter pay back?” use Year 1 contribution ROI (77% — barely positive). If the question is “is the system healthy long-term?” use LTV contribution ROI (606% — excellent).
We benchmark Year 1 contribution ROI at 100%+ as healthy and LTV contribution ROI at 400%+ as elite for B2B services.
## Worked example 2: E-commerce
**Scenario:** UK home goods e-comm. AOV £85. Contribution margin 38% (£32.30 per order).
**Month investment:**
– Google Shopping: £8,000
– Meta Ads: £6,000
– Email tool + agency: £2,500
– SEO retainer: £2,000
– **Total: £18,500**
**Month results:**
– 850 orders attributed to marketing
– Revenue: 850 × £85 = £72,250
– Contribution: 850 × £32.30 = £27,455
**ROI calculations:**
– ROAS: £72,250 / £18,500 = **3.9x**
– Contribution ROI: (£27,455 − £18,500) / £18,500 = **48%**
This is the gap that kills e-comm businesses. ROAS of 3.9x sounds healthy. Contribution ROI of 48% is borderline. Next month’s price increases, return rate spike, or media inflation could push this negative.
E-commerce healthy benchmark: 200%+ contribution ROI on customer acquisition campaigns, with LTV factored in.
## Worked example 3: Local service business (plumbing)
**Scenario:** Multi-engineer plumbing business, Jávea + Costa Blanca. Average job value €380. Contribution margin 55% (€209).
**Quarter investment:**
– Google Ads (local intent): €6,000
– Local SEO retainer: €4,500
– GBP optimisation + reviews: €2,400
– **Total: €12,900**
**Quarter results:**
– 142 jobs attributed to marketing
– Revenue: 142 × €380 = €53,960
– Contribution: 142 × €209 = €29,678
**ROI calculations:**
– ROAS: €53,960 / €12,900 = **4.2x**
– Contribution ROI: (€29,678 − €12,900) / €12,900 = **130%**
Local services typically run the highest digital marketing ROI of any category we work in because intent is pre-qualified and the local competitive set is finite. See our [Local SEO playbook](/services/seo/) for the system that produces this.
## The three benchmarks every business should track
| Metric | Definition | Healthy | Elite |
|—|—|—|—|
| Contribution ROI | (Contribution − Investment) / Investment | 100% | 400%+ |
| CAC payback period | CAC / Monthly contribution per customer | <12 months | <6 months |
| LTV:CAC ratio | LTV contribution / CAC | 3:1 | 5:1+ |
If you're below "healthy" on any of these for three months running, your marketing system needs a rebuild. We do that work under the [Foundations retainer](/services/foundations/).
## What to do this week
1. Pull last quarter's marketing spend from every line item (media, agency, tools, salary). Add them up.
2. Calculate the contribution margin on every product/service.
3. Identify the 30-day, 90-day, and LTV ROI on each channel.
4. Kill any channel below 100% contribution ROI at 90 days unless it's a clear top-of-funnel asset feeding bottom-of-funnel conversion.
Need help calculating real ROI on your marketing? We do a free 30-minute ROI audit where we map your last 90 days of spend against attributed revenue. Book at [/contact/](/contact/) or grab the ROI calculator template at [/resources/?download=compound-playbook](/resources/).
*By Josh Weir, founder of Weir Digital Media. We run marketing systems for UK SMEs doing £500k-£10m revenue. Average client contribution ROI at month 12: 312%.*
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