Definition
ROI (return on investment) is a financial metric used to evaluate the profitability of an investment relative to its cost. To calculate ROI, follow the simple equation below:
How eCommerce Marketers Use ROI
Marketers use ROI as a tool to show how their spending generates revenue online. In marketing, ROI is defined by:
- The outcome (return) you’re focused on
- The spend (investment) behind the channel you’re referencing
If ROI is high, it usually means the campaign is generating significant revenue and proving effective. However, If ROI is low, it may be time to reassess and adjust your campaigns. Here is an eCommerce business example of how ROI can be used in practice:
When marketers look at the entire marketing investment across digital and traditional channels, they can use ROI to see how much revenue was generated with that spend. For example, if a company spends $10,000 on both social media and paid search ads, and it results in $50,000 in revenue, they can calculate their ROI to determine the effectiveness of their combined strategies.
You can also use ROI to determine the efficiency of individual channels, such as measuring Meta spend against the resulting conversions. For example, if $5,000 was spent on Meta ads and it generated $20,000 in sales, the ROI calculation would help determine the profitability and effectiveness of those campaigns.
At Omnitail, we understand that ROI is just one part of the equation, and it doesn’t give you a holistic picture of your campaigns overall performance. Contact our team today to learn how our core strategies are designed to maximize your campaign’s revenue and profit.
