Why Most Brands Get ROI Wrong — And How to Fix It
- Anthony Talisic
- Dec 18, 2024
- 4 min read
TL;DR:
Most brands miscalculate ROI by focusing on surface metrics, ignoring customer-level profitability, and overlooking true costs. This article breaks down common mistakes and provides a modern ROI playbook — including how to engineer incrementality, calculate full investment costs, and align cross-functional teams around profitable growth.
Every business is under pressure to prove that its investments are paying off. Return on Investment (ROI) is the go-to metric executives ask for — whether it's a campaign, a CRM program, or a full digital transformation.
Yet despite the ubiquity of ROI, most brands are mismeasuring it, misinterpreting it, or worse, chasing short-term gains that undermine long-term growth. In many cases, ROI is treated like a static scorecard instead of a dynamic decision-making tool. This leads to budget misallocations, ineffective campaigns, and under-leveraged customer strategies.
So why are so many brands still getting ROI wrong — and what can be done to fix it?
What Is ROI (and What It Isn’t)?
Return on Investment (ROI) is a performance metric that quantifies the financial return generated from a specific initiative relative to its cost. The formula is simple in theory:
ROI = (Gain from Investment – Cost of Investment) / Cost of Investment
In practice, though, the simplicity ends there. Measuring gain is not always straightforward. Are you measuring revenue lift, incremental profit, or customer lifetime value? Are you accounting for cannibalization, discount depth, or media waste? And what’s the real cost when data, tech, and talent are shared across multiple functions?
True ROI should reflect incremental impact, not just surface-level sales performance.
Why Most Brands Get ROI Wrong
1. Over-Reliance on Topline Metrics
Brands often equate sales spikes with ROI success, ignoring whether those sales would have occurred anyway (i.e., no incrementality).
Example: A retailer sees a 20% lift in sales after an email blast, but later discovers 80% of conversions came from frequent buyers who were already planning to shop — meaning the true incremental ROI was near zero.
2. Missing the Long View
Campaigns that deliver quick wins may have poor long-term value. Deep discounts can drive short-term ROI but erode margins, loyalty, and customer expectations over time.
Example: A DTC brand runs aggressive 50%-off promotions to boost Q4 sales, only to find customer repeat rate drops by 40% the following quarter due to devalued perceived pricing.
3. No Customer-Level Attribution
Without knowing which customers were truly influenced, and what segments are profitable, you’re optimizing in the dark. ROI must be segmented by cohort, lifecycle stage, and behavior — not averaged out.
Example: A telecom provider reports strong campaign ROI overall, but a deeper dive reveals that high churn-risk customers received no outreach, while loyal customers — already likely to convert — got the bulk of investment.
4. Failure to Include Opportunity Costs
Not all costs are financial. Poor ROI models overlook time, resource allocation, brand dilution, or the risk of not investing in a better alternative.
Example: A brand allocates 60% of its media budget to underperforming influencer partnerships because they look good in brand lift studies, ignoring more scalable paid social campaigns that drive stronger incremental profit.
5. Misaligned KPIs Across Teams
When marketing optimizes for ROAS and finance looks at EBIT, ROI discussions become fragmented and politically charged. A unified definition of ROI is essential for enterprise alignment.
Example: A retailer’s marketing team pushes a loyalty campaign with a 4:1 ROAS, but finance cuts it, citing a drop in contribution margin due to fulfillment costs and return rates. No one had a full view of customer-level profitability.
How to Fix It: A Modern ROI Playbook
1. Move from ROI Reporting to ROI Engineering
Stop reporting ROI after-the-fact. Instead, design your campaigns with ROI guardrails built in — test design, holdouts, thresholds, and trigger logic.
Example: A fashion brand builds control groups into all triggered email campaigns and sets guardrails around discount thresholds, enabling real-time decisions based on observed lift, not assumptions.
2. Use Incrementality Testing
Controlled experiments, such as A/B testing or geo-split testing, reveal the true incremental lift of your actions — not just what happened, but what wouldn’t have happened otherwise.
Example: A grocery chain runs geo-level holdouts for its mobile coupon push. Results show only 35% of campaign sales were incremental — enabling smarter scaling and cost control.
3. Measure ROI at the Customer Level
Apply customer segmentation and lifecycle analysis to assess ROI per segment. Know where your most profitable growth actually comes from — and where you’re overspending.
Example: A beauty retailer compares campaign ROI across customer segments. They find Gen Z shoppers drive the highest short-term lift, but Millennial segments generate 3x more margin due to higher AOV and lower returns.
4. Connect ROI to Margin, Not Just Revenue
Revenue growth that erodes margin is unsustainable. Incorporate net revenue or contribution margin to get a more complete picture of profitability.
Example: A subscription brand improves its ROI framework by layering in shipping and CAC costs. One “high ROI” channel is revealed to be margin-negative after accounting for refund rates and churn.
5. Create a Cross-Functional ROI Framework
Establish a shared ROI model across marketing, finance, analytics, and product teams. Align on definitions, timelines, KPIs, and success thresholds.
Example: A home goods company launches a monthly ROI sync across departments. Marketing, finance, and data teams agree on shared assumptions and test thresholds, reducing conflicts and aligning decisions around customer lifetime value.
Conclusion: Elevate ROI from Metric to Mindset
Measuring ROI the old way won’t cut it in today’s hyper-competitive, privacy-first world. The brands that win are those that engineer every campaign, every channel, and every customer touchpoint around profitable, incremental growth. ROI isn’t just about measuring outcomes — it’s about shaping smarter inputs.
About Customer Data Hub
Customer Data Hub is a consulting company that helps forward-thinking brands unlock profitable growth through customer-centric analytics. We specialize in segmentation, lifecycle strategy, offer testing, and ROI optimization using advanced data science and proven business acumen. Whether you’re launching a new CRM strategy or scaling your analytics maturity, we help you turn data into decisions that drive sustainable impact.
