What is Return on Investment (ROI)?
Return on Investment is the total profit you see come into your store compared to the investments you’ve made for growth. In this case, it is comparing your Gross Sales to all the costs that come out; it is your total profit divided by advertising costs. Expressed as a formula: ROI = (Gross sales-product costs- discounts-refunds) / Advertising costs. For each $ spent on ads it shows how much are you getting in return. $1 = 100%. In Peel, if you don't have product costs in place, then it is net sales / advertising costs.
How to Improve ROI
Improving ROI is all about sourcing products at strategically to bring them in at an advantageous cost while selling them for a solid profit margin. Based on that margin, you should test your advertising efforts over time to see what ads, channels, and different initiatives bring in valuable customers. You want to focus your marketing spend in the areas that are bringing you the best returns. This should be an ongoing practice that you refine over time.