Digital Lexicon Hub

Net benefit from an investment divided by the investment cost, commonly expressed as a percentage.

ROI gives leaders a common yardstick to compare unlike investments, such as a CRM migration, a new hire or a media campaign, and to decide which ones justify their cost.

A company spends $50,000 on a marketing automation rollout and attributes $80,000 in added gross profit in year one. ROI is ($80,000 minus $50,000) divided by $50,000, or 60%.

ROI ignores risk, ignores timing unless annualized, and swings with what is counted as cost and benefit. Attribution of gains to one investment is often uncertain, and soft benefits such as brand or retention are hard to price.

ROI equals net return (gain from the investment minus its cost) divided by the cost, multiplied by 100 for a percentage. Costs should include implementation, licenses and staff time. To compare investments of different lengths, annualized ROI or measures that discount cash flows, such as net present value and internal rate of return, are more reliable.