ROI (Return on Investment)
ROI is a performance metric that measures the profitability of an investment by comparing the net profit or loss relative to its cost, expressed as a percentage.
Return on Investment (ROI) is the most fundamental business metric for evaluating whether an investment is worthwhile. The formula is: ROI = ((Revenue from Investment - Cost of Investment) / Cost of Investment) x 100. If you invest $10,000 in a marketing campaign and generate $30,000 in revenue, your ROI is 200%.
Google Ads ROI, email marketing ROI, social media ROI, and website ROI are all important to track independently to understand where your money works hardest. ROI calculation becomes more nuanced when you consider customer lifetime value (CLV). A campaign that acquires a customer at a $100 loss on their first purchase might have excellent ROI if that customer spends $5,000 over their lifetime.
In practice
- A professional services firm tracked ROI across channels: their blog content generated a 500% ROI (including creation costs), while paid social media delivered a 150% ROI, leading them to double their content budget
- An e-commerce company calculated that their email marketing generated $42 for every $1 spent (4,200% ROI), making it their most profitable channel by far
- A restaurant calculated that their $2,000/month Google Ads campaign generated $12,000 in attributable reservations, a 500% ROI
- A SaaS startup initially showed negative ROI on paid acquisition, but when accounting for 24-month customer lifetime value, the true ROI was 300%
Not sure how this applies to you?
A senior engineer walks your site, your search presence and the way enquiries reach you, then writes down the three things worth fixing first. You keep the document either way.