What is Return On Investment (ROI)?
ROI analyzes an organization’s return and its value by looking at net gains vis-a-vis Cost; it is calculated as (Revenue – Cost) ÷ Cost. ROI is used to measure the performance of various marketing channels such as PPC, social, email, and others. Positive ROI benchmarks indicate that marketing spending is justified and budget guidelines are optimized to align with business needs; thus, value optimization is achieved. Proper ROI management requires sophisticated spending-based attribution models, spend precision, enterprise resource planning systems interfacing, and direct analytics platform access to revenue streams as a consequence of marketing actions.
Examples are: the revenue attributed to a Google Ads campaign versus its ad spend, SEO ROI compared to paid search ROI, and email nurture series profitability analysis.
Related terms: ROAS, Cost per acquisition, profitability, modeling attribution