🔥 Tier 1 - Must KnowID: roi
Return on Investment (ROI)
Actual profit after all costs, not just revenue
In Simple Words (Zero Jargon):
Net profit made from marketing divided by total marketing investment, showing true return on investment.
Official Mathematical Equation
(Revenue − Total Costs) ÷ Total Costs × 100
Why It Is Critical
ROI is the honest version of ROAS. While ROAS only subtracts ad spend from the equation, ROI subtracts all costs - cost of goods sold, fulfilment, returns, customer support, and any overhead attributable to the campaign. It is the number that tells you whether the business actually made money.
Strategic Rules of Thumb & Execution Playbook
- Use ROI to evaluate whether campaigns are genuinely profitable, not just revenue-efficient.
- Calculate ROI at the campaign level, then at the channel level, then at the overall marketing budget level.
- A positive ROI does not automatically mean you should scale. Consider whether incremental spend will maintain the same ROI or whether returns will diminish.
Calculation Example & Benchmark Matrix
| Component | Value / Calculation |
|---|---|
| Revenue | ₹5,00,000 |
| Ad Spend | ₹80,000 |
| COGS + Fulfilment | ₹2,50,000 |
| Other Costs | ₹20,000 |
| Total Costs | ₹3,50,000 |
| ROI | (₹5,00,000 − ₹3,50,000) ÷ ₹3,50,000 = 42.9% |
| ROAS (for comparison) | ₹5,00,000 ÷ ₹80,000 = 6.25x (looks very different) |
'ROAS and ROI can tell completely different stories about the same campaign. Always calculate both. ROAS is the platform's version of success. ROI is the business's version of success.'
What You Get: The true profitability verdict on a campaign - the number that survives contact with the full P&L.