ROI vs. ROAS vs. ROM: Understanding Key Marketing Metrics

Let’s decode the bowl of alphabet soup that is measuring marketing performance! Three key metrics are often discussed when evaluating success: ROI (Return on Investment), ROAS (Return on Ad Spend), and ROM (Return on Marketing). While they may seem similar, each serves a distinct purpose in evaluating the effectiveness of various business efforts. In this article, we’ll break down what each term means, their differences, and when to use each metric.

What is ROI (return on investment)?

ROI, or return on investment, is a fundamental metric that measures the profitability of an investment relative to its cost. It is used across industries to assess the efficiency of an investment and is calculated as:

Example Scenario: If you invest $10,000 in a new product line and generate $15,000 in net profit, your ROI would be:

ROI is used in marketing and beyond to assess long-term investments, business expansions, and strategic financial decisions.

ROI in B2B Marketing

For B2B companies, ROI is critical in evaluating marketing strategies such as lead generation campaigns, account-based marketing (ABM), and enterprise sales efforts. Since B2B sales cycles are longer (we work with clients where the cycle stretches for years), ROI often takes months or even years to fully materialize, making it essential to track progress and adjust strategies accordingly.

What is ROAS (return on ad spend)?

ROAS, or Return on Ad Spend, specifically measures the revenue generated from advertising campaigns in relation to the amount spent on those ads. It is an essential metric for digital advertisers looking to optimize their ad performance.

Example Scenario: If you spend $5,000 on LinkedIn ads and generate $20,000 in revenue, your ROAS would be:

This means you earn $4 for every $1 spent on ads. Unlike ROI, ROAS focuses on gross revenue rather than net profit, making it a more immediate and campaign-specific metric.

ROAS in B2B Marketing

B2B marketers often rely on high-value lead generation strategies where ad spend must be justified against customer lifetime value (CLV). ROAS helps in optimizing paid campaigns on platforms like LinkedIn, Google Ads, and programmatic advertising. Since B2B deals often involve multiple decision-makers, tracking ROAS over an extended period is necessary to assess the effectiveness of advertising efforts.

What is ROM (return on marketing)?

ROM, or Return on Marketing, takes a broader view of marketing performance by analyzing the overall return from all marketing efforts, not just paid advertising. It includes organic marketing, content marketing, email campaigns, SEO, and other marketing strategies.

Example Scenario: If your company spends $50,000 on marketing (including ads, SEO, content creation, and social media) and generates $200,000 in revenue, your ROM would be:

This means for every $1 spent on marketing, you earn $4 in return. ROM helps businesses evaluate the collective impact of all marketing strategies rather than focusing on individual campaigns.

ROM in B2B Marketing

For B2B businesses, ROM is particularly valuable in measuring the effectiveness of multi-touch marketing strategies. Since buyers in the B2B space often go through long and complex purchase journeys, ROM helps in understanding how various marketing channels contribute to lead nurturing and conversions over time.

Key Differences: ROI vs. ROAS vs. ROM

Metric	Focus	Formula	Best Used For
ROI	Overall profitability	(Net Profit / Total Investment) × 100	Assessing total business investments
ROAS	Advertising efficiency	Revenue from Ads / Cost of Ads	Evaluating ad campaign performance
ROM	Total marketing impact	Total Revenue from Marketing / Total Marketing Spend	Measuring overall marketing effectiveness

When to use each metric

1. Use ROI when making strategic business decisions, such as launching a new product, investing in a new market, or assessing the overall profitability of an investment. In B2B, this can include evaluating the effectiveness of account-based marketing or long-term sales enablement strategies.
2. Use ROAS to measure the effectiveness of paid advertising campaigns, helping to optimize ad spend and maximize revenue from specific marketing efforts. For B2B companies, this is crucial when running lead generation campaigns with high customer acquisition costs.
3. Use ROM for a holistic view of marketing performance, ensuring that all marketing efforts (both paid and organic) contribute effectively to business growth. In B2B, tracking ROM over longer periods is key to understanding the value of inbound marketing, SEO, and content marketing.

Understanding the difference between ROI, ROAS, and ROM is essential for making informed financial and marketing decisions. While ROI provides a big-picture view of investment profitability, ROAS helps fine-tune advertising strategies, and ROM offers insights into overall marketing effectiveness. For B2B companies, tracking these metrics with a long-term perspective is crucial to optimizing high-value lead generation, nurturing relationships, and maximizing revenue from strategic marketing efforts. By leveraging these metrics effectively, businesses can allocate resources wisely and drive sustainable growth.