By Ada Barlatt
Return on Investment (ROI) can be a positive or negative value (and becomes a percentage when multiplied by 100).
ROI is a metric used in a variety of industries to understand the results of an investment.
Similar to Return on Ad Spend (ROAS), the HIGHER the ROI, the better. Unlike ROAS, ROI does represent the profits related to a particular campaign or set of campaigns.
Many organizations use ROAS instead of ROI because it can be a challenge to capture all of the total costs. The Total Cost is the sum of all related expenses; this includes marketing, advertising, fulfillment costs, additional overheads, and more.
Tips for interpreting ROI:
Calculating the ROI can help you understand how your efforts are driving sales. When using ROI, it is vital that you only consider the revenue generated (attributed) to the costs considered. For example, you could look at the total costs for an entire channel (and the total attributed revenue to that channel). Alternatively, you can look at the ROI for a specific campaign (and the attributed revenue to that campaign). When you use ROI, you must track (1) the total related costs and (2) the revenue related to those costs.
In summary, you use ROI to help:
- evaluate the effectiveness of a single email marketing campaign
- evaluate the effectiveness of the email marketing channel
- compare email marketing campaigns
- Note: ROI does not consider the duration of a campaign, so it is important to use the metric in conjunction with the others to get a full picture.
Attribution is a key part of calculating ROI. Learn more about how attribution works in Email Marketing here: Attribution and ROI, Attribution Attribution Attribution: Calculating the effect of Email on other channels and The Challenges of Attribution in Email Marketing.