A worked example
Say a campaign costs $5,000 and brings in sales with $15,000 of gross profit after product costs. ROI is ($15,000 minus $5,000) divided by $5,000, which is 2, or 200%.
ROI versus ROAS
ROAS divides revenue by ad spend and ignores product costs, fees and other expenses. ROI uses profit and can include all marketing costs, like agency fees, tools and staff time, so it shows whether marketing actually makes money.
Counting the right returns
Some returns arrive later, like repeat purchases from a new customer. Using customer lifetime value gives a fuller picture than first-order revenue alone, especially for subscription and repeat-purchase businesses.
Why Marketing ROI matters
Revenue figures can look great while a campaign quietly loses money. ROI keeps marketing decisions tied to profit, which is what keeps a business healthy.
Strong ROAS, weak ROI
A furniture store's ads showed 4x ROAS, which looked healthy. After including product costs, shipping, returns and the agency fee, the campaign barely broke even. Shifting budget to higher-margin products made the real ROI positive.
Common mistakes
Using revenue instead of profit
Revenue ignores what it costs to deliver. Use gross profit or contribution margin.
Leaving out costs
Agency fees, software and staff time are marketing costs too. Include them.
Taking credit for sales that would happen anyway
Some customers would buy without the ad. Use incrementality tests to see what marketing really adds.
Where we work on this