What is ROI (Return on Investment)?
Formula: ((Net Profit - Investment Cost) / Investment Cost) × 100
Measures the profitability of an investment relative to its cost. For example, spending $1,000 on advertising that generates $3,000 in profit yields a 200% ROI. Universal metric used across all business activities. Companies use ROI to evaluate marketing campaigns, equipment purchases, and business expansion decisions.
Measure marketing ROI by tracking campaign costs, revenue attribution, and long-term value creation. Consider both direct and indirect benefits, including brand building and customer loyalty impacts.
Good ROI benchmarks vary by industry and investment type. Generally, a 5:1 ratio (500% ROI) is considered strong for marketing investments, but targets depend on business goals.
Improve ROI through cost optimization, revenue enhancement, and efficient resource allocation. Focus on data-driven decision making, process improvement, and strategic investment planning.
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