ROI is a term that stands for Return on Investment. In marketing and advertising, it is used to describe the profitability of a business’s marketing and advertising campaigns. Because the purpose of marketing is to drive sales, it is very important to understand the costs of your marketing campaigns and what it is bringing in. The resulting answer will allow you to determine if your marketing campaign is making sense.
To calculate ROI, take the revenue that resulted from your advertising and marketing campaign, subtract all of the costs involved in delivering the goods or services, and then divide that by your overall costs: ROI = (Revenue – Cost of goods sold) / Cost of goods sold.
For example, an advertising campaign with a profit of $10,000 and a cost of $1000 would have an ROI of 9, or 900% when expressed as a percentage.