What Is ROI?
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What Is ROI?
ROI (Return on Investment) is a metric that measures how much profit or value an investment generates relative to its cost. It's used across business — from marketing campaigns to equipment purchases to hiring decisions — to answer a simple question: did this investment pay off, and by how much?
The ROI Formula
The basic formula is: ROI = (Net Return − Cost of Investment) ÷ Cost of Investment, usually expressed as a percentage. For example, if a Google Ads campaign costs ₹50,000 and generates ₹150,000 in attributable revenue, the net return is ₹100,000, and dividing that by the ₹50,000 cost gives an ROI of 200% — meaning the campaign returned twice its cost in profit.
Using ROI to Evaluate Spend
ROI is most useful when comparing options against each other — is this marketing channel outperforming that one, is this piece of equipment paying for itself faster than an alternative. It's important to include all relevant costs (not just the obvious ones) for an accurate picture, and to define what counts as "return" clearly, since revenue and profit give very different ROI numbers. ROI alone doesn't capture everything — a campaign with slightly lower ROI but far larger scale might still be the better business decision — so it's typically used alongside other metrics like CPA and total revenue rather than in isolation.