A measure comparing the financial benefit of an activity with the cost required to produce it.
A broad business metric for judging whether an investment created sufficient value.
Short and sweet:
A measure comparing the financial benefit of an activity with the cost required to produce it.
A broad business metric for judging whether an investment created sufficient value.
See also: ROI, Return on Ad Spend, Customer Acquisition Cost
Return on investment is the broader financial concept behind the ROI figure marketers quote, applicable to any spending decision a business makes, not just a marketing campaign, from buying new equipment to hiring an additional team member. Marketing borrowed the term from finance specifically because it forces a campaign to be judged the same way any other business investment would be, rather than getting special treatment just because it’s creative or hard to measure precisely. Framing results this way also gives marketers a shared language with finance and leadership teams who think in these terms about every other part of the business.
A manufacturer buying a new $2 million piece of equipment calculates return on investment by estimating how many years of labor savings it will take to pay off that upfront cost.
A homeowner installing solar panels weighs the payoff the same way, comparing the installation price against years of reduced electric bills before deciding if it’s worth it.
Venture capital firms evaluate every startup bet through this same lens, expecting a handful of big wins to offset the majority of investments that don’t pan out.
