If you invest $---- (amount spent) and your total revenue is $---- (amount returned), you will have a profit/loss of $----, and your ROI will be ----%
Return on Investment (ROI) is simply a way of determining whether or not an investment is profitable.
Let’s expand on the example described here. If Campaign A costs $20,000, generates 40 customers who, in turn, bring about $34,000 of revenues in total, then the ROI of Campaign A is +70%. This is a positive ROI:
34000 - 20000 = 14000
(14000 / 20000) x 100 = 70%.
In this case, you’ve spent $20,000 but made a profit of $14,000.
Now, let’s assume that Campaign B costs $1,000, generates 1 customer who brings $300 in revenues. In the case of Campaign B, the ROI is -70%. This is a negative ROI:
300 - 1000 = -700
(-700 / 1000) x 100 = (-70%)
In this case, you’ve spent $1,000 but also generated a loss of $700.