How to calculate your marketing effectiveness rate (and why it matters).

7 Mar

Marketing can feel like a black hole if you’re not tracking the right numbers. Many small business owners ask: Is my marketing actually making me money?

There’s a simple way to find out. Your marketing effectiveness rate helps you measure whether your investment in marketing is paying off—or just burning through your budget.

How to calculate your marketing effectiveness rate.

The formula is simple:

Revenue ÷ Total Marketing Spend = Marketing Effectiveness Rate

Let’s break it down with an example.

Example calculation

Say you work with an agency and spend the following each month:

$2,300 on social media management
$1,300 on EDM (email marketing) management
$900 on paid ads management
$900 on ad spend

Your total marketing spend for the month: $5,400

Now, let’s say your revenue for the month is $25,000.

$25,000 ÷ $5,400 = $4.63

For every dollar spent on marketing, this business is making $4.63 back. That’s a solid return on investment.

What this number tells you.

If your number is above 1, you’re making more than you’re spending—your marketing is profitable.
If your number is below 1, your marketing costs are exceeding your revenue, and you may need to rethink your strategy.

Taking it a step further

For a clearer picture of profitability, consider factoring in:

Cost of goods sold (COGS) – The cost of producing your products or services.
Net profit margins – Your profit after all expenses are accounted for.

This will give you a more accurate idea of how much of your revenue is actual profit.

Why this matters

This calculation helps you:

Assess if your marketing is working
Determine how much revenue you need to justify your marketing spend
Decide if your agency or strategy is delivering real value

Run the numbers for your own business—are you making money or just spending it?

Kelsey Rosevear