ROI: did this activity make more than it cost?
Return on investment (ROI) measures the net profit from a marketing activity as a percentage of what you spent on it. Positive means it made money. Negative means it lost money.
The hard part is attribution — knowing which revenue came from which activity. It is easy for paid search and email, where the click is traceable. It is much harder for brand campaigns, SEO and content, where the effect is indirect and slow.
Measure it anyway. Imperfect ROI data still produces better decisions than none.
ROAS is not the same as profit
Return on ad spend (ROAS) is gross revenue per pound of advertising. It ignores your cost of goods and everything else, which makes it useful for day-to-day decisions inside ad platforms — which campaign, which audience, which ad.
But a high ROAS does not mean you are making money. A campaign returning £5 per £1 spent (5x ROAS) only turns a profit if your gross margin is above 20%.
Always check ROAS against your gross margin to find the break-even point for a campaign.
CAC and LTV decide whether the model works at all
Customer acquisition cost (CAC) is your total sales and marketing spend divided by the number of new customers it won.
Customer lifetime value (LTV) is what a customer is worth over the whole relationship: average order value, times how often they buy, times how long they stay, minus what it costs to serve them.
The ratio between them is the number that matters. Below 1:1 you spend more to win a customer than they are ever worth — that cannot last. 3:1 or better is the benchmark for a business that can scale.
Churn compounds, which is why it is dangerous
Churn rate is the share of customers you lose in a period. A monthly rate of 3–5% sounds small. It means losing a third to half of your customer base every year.
The cost is easy to understate. Losing a customer who would have produced £1,000 of gross profit over two years is not one lost sale — it is the whole future stream from that relationship.
Cutting churn by a single percentage point usually beats an equivalent gain in new customers, because every customer you keep keeps paying without costing you anything to acquire again.
Conversion rate optimisation pays best when traffic already exists
Conversion rate is the share of visitors who do what you wanted — buy, fill in a form, start a trial.
Small improvements compound against your traffic. Take a landing page with 10,000 visitors a month: lifting conversion from 2% to 2.5% moves you from 200 to 250 customers. That is 25% more output from the same traffic.
At a CAC of £50, that is £2,500 of extra customer value for no additional ad spend. The Conversion Rate Calculator models what any improvement is worth.
Budget allocation follows the channel data
Deciding where the money goes needs per-channel numbers: CAC, LTV and ROAS for each source.
Put the most budget behind channels with the lowest CAC and highest LTV. Cut or drop anything with negative ROI.
A common split is 70% to proven channels, 20% to ones that are growing, and 10% to experiments. The Budget Allocation Calculator models revenue, profit and blended ROI across up to eight channels at once.