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Product ROI Calculator
What is product ROI?
Product ROI (Return on Investment) measures the profitability of your product by comparing the revenue generated from its sales to the total costs of production, marketing, and distribution. This metric allows you to understand what products bring you the most profit and where there is scope for improvement.
Relevant channels: E-commerce platforms, retail stores, B2B product sales, direct-to-consumer businesses
How to use this product ROI calculator
To calculate your product ROI, enter the following details:
Number of Sales: The total number of sales of your product/service during the given period.
Average Revenue per Sale: The average revenue generated from each sale.
Production and Development Cost: The cost incurred to produce and develop the product.
Marketing Costs: The total amount spent on marketing campaigns to promote the product.
Distribution Costs: The costs of distributing the product (shipping, warehousing, etc.).
Additional Costs: Any other costs related to the product, such as operational or handling costs.
The calculator will instantly calculate your product’s ROI based on the above inputs.
Product ROI formula
Product ROI = ((Total Revenue from Product – Total Product Costs) / Total Product Costs) × 100
Here,
Total Revenue from Product = Number of Sales × Average Revenue per Sale
Total Product Costs = Production and Development Cost + Marketing Costs + Distribution Costs + Additional Costs
Understanding the product ROI result
The ideal product ROI will depend on your targets, industry, type of product, etc. In general,
A high product ROI indicates that your product is profitable and generates more revenue than the cost to produce and sell it.
A low product ROI signals that the product is less profitable and that you might need to change its pricing, cost management, or marketing strategies. If the value is negative, the product leads to losses, which must be rectified immediately.
When to calculate product ROI
You should calculate product ROI at different stages of a product’s lifecycle:
After a product launch to assess its early performance
When evaluating ongoing product profitability to determine whether to scale production
To make data-driven decisions on marketing and distribution strategies
To compare different products and understand which are most profitable
How to calculate product ROI (with example)
Let’s say your product had the following data:
Number of Sales = 1,000
Average Revenue per Sale = $50
Production and Development Cost = $20,000
Marketing Costs = $5,000
Distribution Costs = $3,000
Additional Costs = $2,000
In this case, you can calculate your product ROI as follows:
Product ROI = ((Total Revenue from Product – Total Product Costs) / Total Product Costs) × 100
Total Revenue from Product = 1,000 × $50 = $50,000
Total Product Costs = $20,000 + $5,000 + $3,000 + $2,000 = $30,000
Product ROI = ((50,000 – 30,000) / 30,000) × 100 = 66.67%
In this case, the product's ROI is 66.67%, which means it brought in 66.67% more revenue than the cost to produce, market, and distribute it.
How to improve your product ROI
Reduce production costs by finding more cost-effective materials or optimizing the manufacturing process
Increase sales by adjusting your marketing strategy to target high-value customers better
Improve distribution efficiency by partnering with cost-effective suppliers or shipping providers
Boost the average revenue per sale by offering upsells, bundles, or premium versions of your product
Minimize additional costs by streamlining operations and cutting non-essential expenses
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