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If you’re running marketing campaigns or managing a business, chances are you’ve come across the terms ROI (Return on Investment) and ROAS (Return on Ad Spend). At first glance, they might seem interchangeable, but they serve very different purposes in measuring performance. Understanding the distinction between ROI and ROAS can be game-changing when it comes to strategizing and decision-making.
This blog dives deep into these two key metrics—what they mean, how they’re calculated, and most importantly, when and why you should choose one over the other.
What is ROI?
ROI, or Return on Investment, is a broad metric that demonstrates the profitability of an investment relative to its cost. It’s a universal metric used across industries and can be applied to virtually any business operation—not just marketing. ROI allows you to assess whether a specific investment (money, time, or resources) is producing meaningful returns for your business.
ROI Formula
You can calculate ROI using this simple formula:
ROI = (Net Profit / Total Investment) x 100
For example, if you invested $10,000 in a new product line and it generated $15,000 in net revenue, the ROI would be calculated like this:
ROI = ($15,000 – $10,000) / $10,000 x 100 = 50%
A 50% ROI means your net profit is half of what you initially invested, a healthy … Read More
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