ROI(ROI)
Measurement and data
Measurement and data
ROI is the return on an investment: revenue minus cost, divided by cost. In marketing you should work from margin, not revenue.
Calculate on gross margin. A campaign at 3x ROAS can lose money at 25% margin and make money at 60%.
Include costs that don't appear in the ad platform: hours, tooling, returns and payment fees.
Related terms
- ROASROAS is revenue generated by your ads divided by what you spend on them. A ROAS of 4 means €4 revenue per euro spent.
- Customer acquisition costCAC is the total cost of winning one new customer: ad spend plus the people, tools and hours involved.
- Customer lifetime valueCustomer lifetime value is the total margin you earn from an average customer for as long as they stay, not just on the first purchase.
- KPIA KPI is a number you steer on because it links directly to a goal, such as qualified enquiries per month or cost per customer.