ROAS vs ROI in Marketing: What’s the Difference and When to Use Each?

In digital marketing, two metrics come up in every discussion—ROAS and ROI. Both measure performance. Both tell you whether your campaigns are working. But they are not the same, and mixing them up can lead to wrong decisions, wasted budget, and poor strategy.

This guide explains ROAS vs ROI in a simple, clear way. If you’ve ever asked:

• What is ROAS?

• What is ROI?

• What’s the difference between ROAS and ROI?

• When should I use ROI vs ROAS?

You’ll get all the answers here.

What Is ROAS?

ROAS = Return on Ad Spend. It measures how much revenue you earn for every rupee/dollar spent on ads.

Formula:

ROAS = Revenue from ads / Cost of ads

Example: If you spend ₹10,000 on ads and earn ₹30,000 in revenue, your ROAS is 3x (or 300%).

What ROAS Tells You:

• How efficient your ads are

• Whether your campaigns generate enough revenue

• How well your ads convert traffic into sales

• Which campaigns are profitable at the ad level

ROAS is ad-focused, not business-focused. It only considers advertising cost, not total expenses.

What Is ROI?

ROI = Return on Investment. It measures how much actual profit your business makes after all expenses.

Formula:

ROI = (Profit / Total investment) × 100

Profit includes:

• Cost of goods

• Website expenses

• Packaging

• Team salaries

• Shipping

• Tools

• Ad cost

Example: You earn ₹30,000 in revenue. Your total cost (including ads, product cost, team, etc.) is ₹20,000. Profit = ₹10,000. ROI = (10,000 / 20,000) × 100 = 50%.

What ROI Tells You:

• Is the business actually making money?

• Which products are profitable?

• Can you scale the business sustainably?

• Are operations efficient?

ROI is business-focused and gives a complete financial picture.

ROAS vs ROI: The Difference

Here is the simplest way to understand the difference:

ROAS measures revenue.

ROI measures profit.

ROAS cares only about ads. ROI cares about the entire business.

Metric	ROAS	ROI
Focus	Ads	Overall business
Measures	Revenue generated	Profit generated
Expenses counted	Only ad spend	All costs (product, team, tools, shipping, ads)
Good for	Campaign analysis	Business decisions
Looks at	Short-term results	Long-term profitability

Example to understand the difference clearly:

You spend ₹10,000 on ads. You get ₹40,000 in revenue.

• ROAS looks great: 4x

• But… if your product cost, team cost, shipping cost etc. are ₹35,000, your profit is only ₹5,000.

ROI = ₹5,000 / ₹35,000 = 14.28% This is low.

So the ads looked amazing. But the business profit was not strong.

This is why both metrics matter.

ROAS vs ROI Marketing: Which Should You Focus On?

Focus on ROAS when:

• You are testing new ads

• You want to find winning creatives

• You are comparing platforms (Meta vs Google)

• You want to pause underperforming campaigns

• You need to measure ad efficiency quickly

ROAS helps you decide:

• Which ad is better

• Which audience converts

• Which campaign wastes budget

• Which creative gives more revenue

ROAS is a performance marketing metric.

Focus on ROI when:

• You are planning long-term strategy

• You want to know if your business is profitable

• You want to fix pricing

• You want to understand margins

• You want to know if scaling is possible

ROI helps you understand:

• Which product brings real profit

• Which expenses need to be optimised?

• Whether your business is financially healthy

• How much you can afford to spend on ads

ROI is a business metric.

When to Use ROI vs ROAS (The Clear Rule)

Use ROAS when you are inside your ads dashboard. Use ROI when you are inside your business dashboard.

Here’s the clean guideline:

Use ROAS when:

• You are analyzing ads

• You want to scale campaigns

• You want to cut bad campaigns

• You are doing A/B testing

• You want to measure revenue per ad rupee

Use ROI when:

• You are analyzing profit

• You are planning budgets

• You are calculating margins

• You want to understand true business success

• You are forecasting long-term growth

If ROAS is high but ROI is low, it means:

• Product cost is too high

• Pricing is too low

• Shipping is expensive

• Operations are inefficient

If ROAS is average but ROI is high, it means:

• You have strong margins

• Your business model is healthy

• Scaling may be safe

Why Do Both Metrics Matter Together?

ROAS alone can lie. ROI alone can confuse.

But together, they give the full picture.

ROAS shows performance.

ROI shows profitability.

Successful brands use both.

For example:

• D2C brands track ROAS daily

• Marketing teams use ROAS to optimize campaigns

• Finance teams use ROI to plan budgets

• Founders use ROI to understand business health

The smartest decisions happen when marketing and finance metrics work together.

Practical Example: ROAS vs ROI Explained Clearly

Let’s take a simple scenario.

Scenario 1: High ROAS, low ROI

Ad Spend: ₹20,000 Revenue: ₹60,000 ROAS: 3x (very good) Cost of goods, shipping, team, etc.: ₹50,000 Profit: ₹10,000 ROI: 20% (low)

You earned revenue, but profits are tight.

Scenario 2: Medium ROAS, high ROI

Ad Spend: ₹20,000 Revenue: ₹40,000 ROAS: 2x (good) Cost of goods etc.: ₹20,000 Profit: ₹20,000 ROI: 50% (strong)

Business is healthier even though ROAS is lower.

This shows why ROAS alone is not enough.

ROAS and ROI Benchmarks (What’s Good?)

Although benchmarks vary by industry, a general rule is:

Good ROAS:

• 2–3x for scaling

• 3–5x for strong profitability

• 1.5x if you’re testing

• Below 1x → losing money

Good ROI:

• 20–50% for stable business

• 50–100% for strong business

• 100%+ for high-margin brands

• Below 0% → business losing money

Final Summary: ROAS vs ROI

Here is the simplest way to remember it:

ROAS = How much revenue your ads generate.

ROI = How much profit your business generates.