What does 'return on investment' (ROI) mean in marketing?

Return on investment (ROI) in marketing specifically refers to the measurement of the profitability of a marketing campaign relative to its costs. It assesses the effectiveness of the investment made in marketing, helping businesses evaluate whether the financial resources allocated to marketing efforts generated sufficient returns.

For example, if a company spends $10,000 on a marketing campaign that results in $50,000 in sales, the ROI can be calculated to determine how effectively the company has utilized its marketing budget. This measurement is crucial for determining the overall impact of marketing strategies on a company's financial performance and for guiding future marketing investments.

In contrast, measures of customer satisfaction focus on the consumer's experience and feelings post-purchase, while analysis of competition involves assessing rivals and market conditions that do not directly relate to the profitability of specific marketing expenditures. Lastly, strategies for expanding market reach pertain to how a company might target new customers or demographics, which is different from the evaluation of financial returns generated by marketing initiatives. Understanding ROI provides critical insights into which marketing strategies are working best and which may need adjustment or enhancement.