What Is ROI (Return on Investment)?
ROI, or Return on Investment, evaluates how effectively an advertising campaign converts spending into measurable returns. Essentially, it answers the critical question: did the investment in advertising pay off? Calculating ROI helps advertisers determine efficiency and supports decisions about whether to reuse the medium.
ROI is calculated using a standard formula, though its accuracy depends on the data collected from the campaign:
[((number of leads * lead-to-customer rate * average sales price) – cost or ad spend) / cost or ad spend] x 100
Here’s an example:
Imagine a record label spends $2,000 on a billboard campaign to promote a new album. The billboard generates 2,500 website clicks (number of leads), resulting in 1,000 album downloads (0.4 lead-to-customer rate) at an average price of $10 per album. The ROI would be:
[((2,500 * 0.4 * $10) – $2,000) / $2,000] x 100 = 400%
This campaign achieves a 400% return on investment—an exceptional result, as anything below a 2:1 return is generally seen as underwhelming.
That said, focusing solely on direct monetary returns can be limiting. Modern advertising metrics often take a more holistic view. Not every ROI result can be quantified; for example, increased brand awareness or subtle long-term customer loyalty may not show up immediately in sales. Consider how many viewers might leave the advertiser’s URL open in their Safari tab for later use—small, incremental steps toward long-term goals.
For outdoor advertising, these intangible benefits can have a meaningful impact, proving that ROI often extends beyond the numbers.
