What is ROI?
Return On Investment – the profitability of your marketing investment.
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How ROI Works
ROI, or Return On Investment, measures the profit generated from marketing activities relative to their cost. Unlike ROAS which focuses on revenue, ROI accounts for costs and profit margins. It's calculated as (Revenue - Cost) / Cost × 100.
ROI is the ultimate business metric because it shows actual profitability. However, it's more complex to calculate than ROAS because you need to know product costs, overhead, and sometimes long-term customer value. A campaign with 200% ROI means you made $2 profit for every $1 spent. Positive ROI doesn't always mean success—you also need to consider opportunity cost and whether that capital could generate better returns elsewhere.
Frequently Asked Questions
What is ROI?
Return On Investment – the profitability of your marketing investment.
ROI, or Return On Investment, measures the profit generated from marketing activities relative to their cost. Unlike ROAS which focuses on revenue, ROI accounts for costs and profit margins. It's calculated as (Revenue - Cost) / Cost × 100.
What does ROI stand for?
Why is ROI important?
ROI is the true north metric that executives and CFOs care about because it shows actual business profit, not just revenue. Understanding the difference between ROAS and ROI prevents the trap of scaling campaigns that drive revenue but destroy profitability due to low margins. For strategic decision-making, ROI is essential—it determines which channels deserve more investment and which are quietly draining resources despite looking successful on surface-level metrics.
How do you calculate ROI?
ROI = ((Revenue - Total Costs) ÷ Total Costs) × 100. For example, if you spent $10,000 on ads, generated $50,000 in revenue, and had $30,000 in product/operational costs, your ROI is (($50,000 - $10,000 - $30,000) ÷ $10,000) × 100 = 100%.