## #SB50 Big Game Ad ROI Calculator

When the big game rolls around every year, there is always one topic that comes to the front of people's minds: the commercials. Not only do people love to talk about all of the fun, silly or downright exciting commercials that they see, but some people who don't even love football still tune in just to see the ads.

A huge amount of money is also spent on the ads themselves, not just to produce them, but for the airtime. Networks regularly charge millions of dollars for as little as 30 seconds because they know that close to a billion people or more will be watching. With that number of viewers, ANY ad that airs during the football game has to be considered a successful one, right?

Not necessarily.

### Return on Investment - Money Well Spent?

The term that people use to figure out whether they've just spent a great deal of money in the smartest way possible or just wasted money incredibly efficiently is called ROI, or "return on investment." Essentially, it lets you compare the amount of money you spent versus what you got in return (be it a straight return or increased sales or something else entirely) so that you can make a determination about the effectiveness of your purchase based on your own unique goals.

In terms of figuring out whether or not any one particular ad during the big game was a wise investment, it requires you to break things down in terms of the actual product being advertised. More specifically you need to know the unit price of the product being advertised, the percentage of profit in each single unit of the product being sold and the overall cost of the ad.

Once you have those three pieces of information, you can plug them into the following formula to found out how many units you would need to sell in order for that ad to essentially "break even" or pay for itself.

Unit Sale Required = Ad Cost / Price X %P

Every dollar after that would be pure profit, in a certain sense. Anything under that basically means that you would have made more money by just not purchasing an ad during the big game at all.

So for the sake of argument, let's say that you're selling widgets that cost $10 per unit. When you consider things like labor, raw materials and other overhead costs, they actually cost you around$7 to produce - which means that you make roughly $3 of profit every time someone buys a new widget right from your store. Now, let's say that you decided that this was the year to splurge and also spent$2,000,000 on an ad that would air right during halftime at the big game. The entire world will be watching, so this is money well spent, right? Sure, that's expensive, but the huge volume of sales you'll generate will allow the ad to easily pay for itself, right?

### Let's Calculate.

By taking that information and plugging it into the previous equation, we get an ad cost of $2,000,000 divided by a price of$10 and a $3 profit. Because we need to be working with a percentage, we're looking at a roughly 30% profit for each unit sold. At this point, it's important to keep in mind that this would be a very, very high percent of profit in each product sold for your average company. Most companies have razor thin profit margins in order to keep consumer costs down, which essentially means they need to do whatever it takes to increase sales volumes as high as possible in order to stay in business. This essentially means that they need an ad like this to pay of HUGE for it to really pay off at all. First, let's take the price of each widget ($10) and multiply it by the percentage of profit in each widget sold (30%, or 0.30). $10 x 0.30 is 3. Now, let's take the cost that you spent on your revolutionary advertising ($2 million dollars) and divide it by the number we just calculated. \$2 million divided by 3 is 666,666.67.

This means that in order for you to see any type of return on investment for your ad at all, you need to sell 666,666 widget - but there's a catch. Those aren't 666,666 period - those are 666,666 widgets that you can directly contribute to the ad itself in order to determine whether or not it was a success. Basically, you need to take the average amount of widgets that you're already selling, add 666,666 and THEN determine whether or not you spent your money wisely or you just burned through a giant stack of cash like you had been ordered to do so.