What is return on investment?
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Return on Investment (ROI)

What is ROI?

Return on investment (ROI) calculates the profit from a campaign after subtracting the costs, representing the net money made after the final totals have been entered. In comparison, ROAS focuses only on the revenue generated per dollar spent on advertising, not accounting for other operating expenses. 

How does ROI work?

ROI works by comparing the financial impact of a marketing campaign to the cost of the campaign. This allows marketers to see how effective their campaigns are at generating revenue.

Types of ROI:

  • Campaign ROI: This type of ROI measures the overall financial impact of a specific marketing campaign.
  • Channel ROI: This type of ROI measures the financial impact of a specific marketing channel, such as search engine marketing, social media marketing, or display advertising.

How to measure ROI:

ROI is measured using he following formula: 

ROI = Net profit / Total cost of campaign

Net profit is the total revenue generated from the campaign minus the total cost of the campaign. The total cost of the campaign includes the cost of advertising, production, and other expenses.

Why is ROI important to marketers?

ROI allows marketers to:

  • See how much money they are making or losing on their marketing campaigns.
  • Compare the performance of different campaigns and channels.
  • Set budgets for future marketing campaigns.
  • Allocate their marketing resources more effectively.

Who needs to know what ROI is:

  • Performance marketer
  • Digital marketer
  • Paid search specialist
  • Social media marketer
  • Display advertising specialist
  • Ecommerce manager
  • Retail manager
  • Marketing manager
  • Agency owner
  • CMO

Use ROI in a sentence: “ROI can be calculated for different levels of a marketing campaign, such as individual campaigns, channels, and overall marketing strategy.”