Digital marketing
“Is our advertising working?” is the question every managing director asks. Let us go through how to calculate ROI properly — even when attribution is unclear.
In brief
- ROI and ROAS are different things — do not conflate them.
- You have to know LTV before you can calculate real ROI.
- Blended CAC versus paid CAC: which one are you using?
- MMM (media mix modelling) is essential for large-budget brands.
- Attribution is always some kind of estimate. Accept it and agree the rules.
ROI versus ROAS: the basic difference
- ROAS (return on ad spend): revenue per ad euro. Simple, but not the whole truth.
- ROI (return on investment): includes the margin, not just the revenue.
- Example: €5,000 of ad spend → €20,000 of revenue → ROAS 4:1.
- Same example: a 30 % margin → real return €6,000 − €5,000 = €1,000 of ROI.
LTV: the customer’s whole lifetime value
- LTV = average transaction × purchase frequency × retention time.
- SaaS: monthly price × average lifetime in months.
- Ecommerce: average order × orders per year × relationship length in years.
- LTV decides how much you can pay to acquire a customer.
MMM (media mix modelling)
- A large-budget brand (over €100,000/month) needs MMM.
- MMM measures the channels’ effect on revenue statistically.
- It explains the effect outside attribution (TV versus digital, for instance).
Frequently asked questions
How often should ROI be calculated?
Monthly per channel, quarterly for the whole business.
Is GA4 data enough for ROI calculation?
Not on its own. Combine GA4, the CRM and the accounting data.
How do you present ROI to the board?
At its simplest: investment versus margin by channel. Not GA4 screenshots.
Related reading
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