Return on investment
ar-oh-EYE
The profit or value generated relative to the cost of an investment. The universal metric for whether something was worth doing.
ROI is the return generated relative to what you spent. The formula: (gain from investment minus cost of investment) divided by cost of investment. If you invested $100k in a marketing program and it generated $400k in revenue, the ROI is 300%.
In B2B marketing, ROI is the metric that justifies budgets. Every program should be measured on its return. The CFO does not care about impressions or leads. They care about whether the $1M marketing budget generated enough pipeline and revenue to justify the spend.
The challenge with marketing ROI is attribution and time lag. A blog post published today might influence a deal that closes in 12 months. Attributing ROI to specific activities requires reasonable attribution models and patience to let the data mature. Report ROI with honest methodology and time horizons.
Examples
Calculating ROI on a marketing program.
Annual content marketing investment: $400k (team + tools + freelancers). Pipeline attributed to content: $4M. Revenue closed from content-sourced pipeline: $1.2M. ROI: ($1.2M - $400k) / $400k = 200%. The program generated $3 for every $1 invested.
ROI differs by marketing channel.
SEO ROI: 800% (high return, long time horizon). Events ROI: 150% (moderate return, immediate). Paid ads ROI: 250% (moderate return, fast). The CFO asks why the team does not allocate everything to SEO. The CMO explains: SEO takes 12 months to compound. Events and ads provide immediate pipeline while SEO builds.
An ROI calculator as a sales tool.
The marketing team builds an interactive ROI calculator. Prospects input their team size, deployment frequency, and incident costs. The calculator shows projected savings. Deals where the prospect uses the ROI calculator close at 2x the rate of deals without it.
In practice
Read more on the blog
Frequently asked questions
How do you calculate marketing ROI?
Revenue attributed to marketing minus marketing investment, divided by marketing investment. Use multi-touch attribution to connect revenue to specific programs. Report ROI on a trailing 12-month basis to account for long B2B sales cycles.
What is a good marketing ROI?
A 5:1 ratio (revenue to spend) is the standard benchmark for B2B. That means $5M in revenue from $1M in marketing investment. Below 2:1 means the program is barely covering costs. Above 10:1 may mean you are underinvesting in growth.
Related terms
Revenue generated per dollar spent on advertising. A ROAS of 5:1 means every $1 in ad spend generated $5 in revenue.
The cost to acquire a customer or conversion through a specific marketing channel. The bottom-line efficiency metric for paid campaigns.
The total cost of sales and marketing divided by the number of new customers acquired in a period.
The total gross profit expected from a customer over the entire relationship. LTV determines how much you can spend to acquire them.
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