As a marketer, you’re constantly under pressure to deliver immediate results, which can often distract you from the more crucial objective of sustained, long-term financial gain. To justify marketing’s value—especially to CFOs—and build profitable brands, your strategies must look beyond short-term wins.
Let’s break down the mechanics of key metrics like iROAS, ROAS, ROI, and mROI, and then explore why you need to optimize your marketing budget for the full profit and loss (P&L) statement, rather than just spending within a single ad platform.
Key takeaways:
- ROAS, iROAS, ROI, and mROI are core marketing metrics that show efficiency (ROAS), incrementality (iROAS), profitability (ROI), and marginal returns on additional spend (mROI).
- Using ROAS alone can create a false sense of success for marketers. This metric highlights revenue against ad spend but ignores total costs and organic demand, often overstating marketing’s real contribution.
- Integrating other metrics into your marketing performance analysis helps show the real picture. iROAS reveals incremental lift, ROI accounts for full investment, and mROI shows when added budget produces diminishing returns.
- Keen helps marketers measure incrementality across channels, run scenarios, and forecast profitability, building a stronger case for budgets and proving long-term value to finance.
ROAS, iROAS, ROI, and mROI: Definitions
Understanding the differences between ROAS, iROAS, ROI, and mROI can help marketing leaders move from surface-level measurement to full-funnel optimization and financial clarity.
| Marketing metric | ROAS: Return on ad spend | iROAS: Incremental return on ad spend | ROI: Return on investment | mROI: Marginal return on investment |
| Purpose | Measures the revenue generated for every dollar spent on advertising | Isolates incremental revenue directly attributable to advertising efforts | Evaluates the profitability of an investment by considering both the costs and the returns | Assesses the additional return generated by an incremental investment |
Now let’s break down how marketers can use ROAS, incremental ROAS, and other metrics to optimize investment decisions.
What is ROAS? Understanding return on ad spend
Return on ad spend, or ROAS, is a marketing metric that provides a quick snapshot of the effectiveness of individual campaigns, but it often leads to short-term thinking. By focusing on ROAS, marketers might miss out on the broader picture, failing to account for overall profitability and long-term brand growth.
What is iROAS? Understanding incremental return on ad spend
Incremental return on ad spend (iROAS) is the measurement of the incremental revenue directly attributed to ads, filtering out what would have occurred organically. iROAS helps identify the true impact of ad spend optimization by distinguishing between organic sales and those driven by ads. However, iROAS can still fall short if it doesn’t align with the overarching business strategy and long-term objectives.
Keep learning: What is incrementality in marketing?
What is ROI in marketing? Understanding return on investment
Return on investment (ROI) measures the extent to which marketing investments contribute to overall profitability. ROI encourages a holistic view, aligning marketing goals with the company’s financial objectives.
Read also: Forecasting revenue and demonstrating marketing ROI
What is mROI? Understanding marginal return on investment
The marginal return on investment (mROI) is a metric that helps identify the point at which further investment yields diminishing returns. By focusing on mROI, marketers can make data-driven decisions to allocate resources more effectively, ensuring that every dollar spent contributes to long-term financial growth.
ROI vs ROAS: Differences explained
ROI and ROAS serve distinct roles in marketing performance measurement. ROAS is laser-focused on ad spend efficiency, calculating how much revenue each dollar of advertising generates. ROI, on the other hand, accounts for the full investment picture, including creative, tooling, labor, and overhead.
Understanding the difference between ROI and ROAS helps marketers zoom out. Let’s say your team spends $100,000 on an ad campaign that drives $500,000 in revenue. That gives you a ROAS of 5.0—great, right?
But when you include other costs—like $80,000 for agency fees, $30,000 for creative production, and $40,000 in marketing software—the total investment jumps to $250,000. Your ROI drops to 1.0. Still profitable, but a very different story than the one ROAS alone suggested.
| Marketing performance metric | What this metric measures | Metric use cases | Metric limitations |
| ROAS | Revenue generated per dollar of ad spend | Assess media buying efficiency | ROAS ignores non-media costs |
| ROI | Net profit relative to total investment | Evaluate business-level profitability | ROI requires full cost visibility |
ROAS vs ROI formula
At a formula level, marketers calculate ROAS as revenue divided by ad spend. ROI goes further: it subtracts total costs (not just media) from revenue, then divides by those costs:
- ROAS = Revenue ÷ Ad spend
- ROI = (Revenue – Total costs) ÷ Total costs
The distinction matters because optimizing your budget based only on ROAS can mask inefficient strategies that erode return on investment.
ROAS vs iROAS: Key differences
Traditional ROAS gives a surface-level view of return, but it doesn’t show what your marketing actually caused. That’s where incrementality measurement helps. iROAS isolates the revenue driven directly by ads, filtering out what would’ve happened anyway.
- ROAS = Revenue ÷ Ad spend
- iROAS = Incremental revenue ÷ Ad spend
The difference between iROAS and ROAS may seem small, but it’s strategic. With ROAS, you might think an ad campaign was a success because it generated $500K in revenue. But what if $400K of that revenue would have happened organically, without the ad? iROAS helps answer that question, showing whether your spend truly drives results.
Marketing leaders use iROAS to evaluate an ad campaign’s true lift across channels. This metric brings clarity to complex scenarios—like when ads overlap with promotions, organic search, or retail partner efforts. And when paired with marketing mix modeling, iROAS provides a forward-looking view: where incremental dollars should go to maximize growth and profitability.
Download our marketing mix modelling playbook.
The strategic advantage of full P&L optimization
Focusing only on ad platform-specific metrics such as ROAS can lead to myopic decision-making. Instead, marketers should optimize for the full profit and loss statement. This way, your marketing efforts are aligned with your company’s broader financial goals, driving sustainable growth and profitability.
By integrating iROAS, ROI, and mROI into your analysis, you can gain a deeper understanding of how marketing investments impact the bottom line. This holistic perspective allows for smarter marketing budget allocations, better justifications to the CFO, and ultimately, the creation of profitable brands.
Learn how to optimize your future marketing spend with past and present data.
Go beyond ROAS in marketing and get a clear view of your returns with Keen
Keen’s AI-powered MMM platform empowers marketers to move beyond siloed metrics such as ROAS and embrace a data-driven approach that maximizes profit.
With our marketing measurement platform, you can navigate the complexities of media investments and get a better understanding of how your ad spend contributes to your company’s bottom line. By leveraging your historical data, our model creates an optimized plan that shows you how to achieve revenue growth with the same budget.
Sign up for a free trial to see our platform in action.
