What is ROI?
Return on Investment (ROI) is a fundamental metric for evaluating the profitability of investments. Formula: ROI = (Profit - Investment) / Investment × 100. Example: €10,000 ad spend generates €50,000 revenue at 60% margin = €30,000 profit. ROI = (30,000 - 10,000) / 10,000 × 100 = 200%. In marketing, ROI is often confused with ROAS (Return on Ad Spend) - ROAS only considers ad spend vs. revenue, ROI all costs vs. profit. For accurate ROI calculation, all costs must be included: labor time, tools, agency costs. A positive ROI means profit, a negative means loss.
Key Points
- Formula: (Profit - Investment) / Investment × 100
- Positive = profit, Negative = loss
- ROI ≠ ROAS (different calculations)
- Include all costs for true ROI
- Define time period for calculation
- Create comparability between channels
Practical Example
“Our SEO investment of €20,000 generated €150,000 additional revenue - an ROI of 350%.”