In a world where marketing budgets must constantly be defended and documented, it is crucial to be able to show whether an effort creates real value.
That is precisely why ROI has become one of the most central KPIs in digital marketing.
It helps companies distinguish between initiatives that only create activity and those that actually contribute to growth.
But what is actually behind the concept? And how is it measured in practice?
What is ROI?
ROI stands for Return on Investment and is a key concept that shows how much return an investment generates in relation to the total costs.
In digital marketing, it is used to assess whether campaigns like Google Ads, SEO or Paid Social provide a financial profit rather than just traffic or exposure.
The formula for ROI is:
Example: If a company spends DKK 50,000 on ads and generates DKK 150,000 in revenue, ROI = (150,000 – 50,000) / 50,000 × 100 = 200%.
Why is ROI important in digital marketing?
ROI is important as it provides a clear picture of whether the marketing effort is creating value for the resources invested. Without ROI, you risk focusing on clicks, impressions and other vanity metrics without real business impact.
By measuring ROI, you can prioritize the channels and campaigns that deliver the best, optimize your budget department, and make better decisions.
Some key reasons to work with ROI are:
Documentation of the marketing budget’s effect
Provides clear documentation of the effect of the marketing budget
Helps identify the channels and campaigns that generate the highest returns
Strengthens the decision-making basis for strategic priorities
Creates opportunities for ongoing optimization based on concrete results
For many companies, ROI serves as a management tool to determine whether marketing activities should be scaled up, adjusted, or stopped.
ROI in different marketing disciplines
SEO
The ROI of SEO is often long-term, as investments in technical optimization, content and link building typically only show full benefits over time. Once rankings improve, SEO can deliver a stable and very cost-effective return.
Google Ads
In Google Ads, ROI can be measured relatively quickly, as clicks and conversions are tracked directly. It’s all about balancing Cost Per Click (CPC), Cost Per Acquisition (CPA), and conversion rate to ensure a profitable ad campaign.
Paid Social
Social media ROI depends on the type of campaign. Direct sales campaigns can provide clear ROI, while branding campaigns require a broader understanding of value creation, as the impact is not always measured in immediate sales and conversions.
Conversion Optimization
By focusing on improving the user experience on your website and campaigns, you can create significantly better results from existing traffic.
When more visitors are motivated to perform the desired action, the conversion rate increases accordingly.
This has a direct positive effect on ROI, as the return is increased without requiring a larger advertising budget.
Challenges in measuring ROI
Although ROI is one of the most widely used and valuable KPIs in digital marketing, measuring it comes with a number of challenges. Therefore, it requires a nuanced approach if you want to have a more accurate picture of what your marketing efforts are actually contributing.
Although ROI is a strong KPI, there can be challenges:
Attribution: It can be difficult to determine which channel creates the most value, especially with complex customer journeys.
Time horizon: Some investments only show returns in the longer term (e.g. SEO and branding).
Non-financial benefits: ROI typically measures financial benefits, but branding, customer loyalty and awareness building can be difficult to put a direct number on.
How to improve ROI
To increase ROI, companies should focus on:
Optimizing conversion rates through A/B split testing and UX improvements
Targeted segmentation and audience customization
Ongoing performance analysis of all marketing channels
Focus on Customer Lifetime Value (CLV) so that ROI is measured across the entire customer journey
Automation and smarter budget allocation across channels
ROI vs. other KPIs
ROAS (Return on Ad Spend): Only measures ad return in relation to ad spend, where ROI includes all costs.
CPA (Cost Per Acquisition): Shows what a conversion costs, but does not take into account the value of the conversion.
CLV (Customer Lifetime Value): Assesses a customer’s total value over time, which can help set realistic ROI goals.
FAQ
How does ROI differ from ROAS?
ROI differs from ROAS in that it includes all costs in the calculation, not just advertising spend. While ROAS focuses on the relationship between advertising spend and revenue, ROI provides a more complete picture of the total investment and the real return.
This means that ROAS can be used as a quick indicator of ad effectiveness, while ROI is more suitable for assessing the overall business value of an effort.
Does a positive ROI always mean success?
A positive ROI means that an effort yields more than it costs, but it does not necessarily mean success. The return must be assessed in relation to alternative investments and the company’s objectives.
What is a good ROI in digital marketing?
A good ROI typically depends on the industry, business model, campaign type and goals. However, many companies work with a goal of at least 100%, which means that every krone invested generates 2 kroner in return.
The most important thing is to assess ROI in relation to the company’s own goals and the lifetime value of customers. This way you ensure that the return is not only positive, but also sustainable in the long term.
How to improve ROI without increasing the budget?
ROI can be improved without increasing budget by optimizing conversion rates – for example, through better user experience, sharper messaging, and more precise CTAs. When more visitors convert, the return on investment automatically increases without additional ad spend.
Can ROI be used to measure branding campaigns?
Yes, ROI can be used to measure branding campaigns, but it requires a broader approach than direct sales activities. The impact often only becomes apparent in the long term and in the form of soft KPIs such as awareness, loyalty and preference.
To get a more accurate picture, ROI should therefore be supplemented with metrics such as brand awareness, share of voice and customer satisfaction. This way, you can assess both the financial and strategic value of the branding effort.