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What is marketing ROI?

Short answer

Marketing ROI is the incremental profit generated by a pound of marketing spend, divided by that pound. It is a causal measure: only sales that would not have happened without the marketing activity count.

The formula

Marketing ROI = incremental profit / marketing cost. Incremental profit is the extra gross profit (or contribution) that would not have existed without the marketing activity, measured over the full response window including carry-over.

ROI is not ROAS

ROAS (return on ad spend) is revenue divided by media cost - a platform metric that includes sales that would have happened anyway and ignores margin. ROI is incremental profit divided by total cost - the CFO metric. A channel can look profitable on ROAS and be value-destroying on ROI. Always know which one you are reporting.

Blended vs marginal ROI

Blended ROI is the average return across all spend in a channel. Marginal ROI is the return on the next pound. Budgets should be optimised on marginal ROI: reallocate until the marginal ROI of the next pound in every channel is roughly equal. That is when the mix is efficient.

Time horizon matters

Short-term sales activation and long-term brand building have different ROI profiles. Reporting only short-window ROI systematically under-values brand media. The 60/40 brand/activation split (Binet and Field) exists because long-term ROI is real - and MMM is how you measure it.

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