Practical explanation:
ROI is calculated by subtracting the cost of an investment from the return it generated, dividing that by the cost, and multiplying by 100. If you spent $2,000 on a campaign and it generated $6,000 in revenue, your ROI is 200%.
In marketing, ROI is used to evaluate whether a specific activity — a campaign, a website, a rebrand — produced more value than it cost. It's a broader measure than ROAS because it can account for all associated costs, not just ad spend.
Why it matters
ROI gives businesses a common language for comparing very different investments. Should you spend $5,000 on SEO or $5,000 on paid ads? ROI — calculated over a defined period — helps answer that question with numbers rather than assumptions.
What to watch out for
Marketing ROI can be hard to measure precisely, especially for activities like brand building or content that produce results over a long time horizon. Short-term ROI calculations can make long-term investments look worse than they are.
Related terms: ROAS, PPC, Paid Traffic, SEO