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Expert Answer • 2 min read

What's the difference between gross and net ROI for discounts?

As an e-commerce manager, I'm struggling to understand the nuanced financial metrics behind my discount campaigns. I know I'm tracking return on investment (ROI), but the terms 'gross ROI' and 'net ROI' seem confusing. I want to accurately measure the true impact of my promotional strategies, understand how different discount levels affect my bottom line, and make data-driven decisions about future marketing investments. What exactly distinguishes gross ROI from net ROI, and how can I calculate and interpret these metrics effectively?
Muhammed Tüfekyapan

Muhammed Tüfekyapan

Founder & CEO

2 min

TL;DR - Quick Answer

Gross ROI measures total revenue generated from a discount campaign divided by campaign costs, while net ROI subtracts all associated expenses like marketing, product costs, and overhead, providing a more accurate representation of true profitability.

Complete Expert Analysis

Gross vs Net ROI: A Comprehensive Breakdown

Understanding the distinction between gross and net ROI is crucial for making informed discount strategy decisions that drive sustainable growth.

Fundamental Definitions

MetricCalculationKey Characteristics
Gross ROITotal Revenue ÷ Campaign CostSimplified, top-line view of performance
Net ROI(Total Revenue - Total Expenses) ÷ Total ExpensesComprehensive profitability assessment

Detailed Calculation Walkthrough

1.

Gross ROI Example

Campaign Cost: $1,000
Total Revenue Generated: $5,000
Gross ROI = $5,000 ÷ $1,000 = 5x or 500%

2.

Net ROI Example

Campaign Cost: $1,000
Total Revenue: $5,000
Product Costs: $2,500
Marketing Expenses: $500
Net ROI = ($5,000 - $2,500 - $500 - $1,000) ÷ $1,000 = 1x or 100%

Expenses to Consider in Net ROI

Direct Expenses

  • ✓Discount amount
  • ✓Product manufacturing costs
  • ✓Shipping and fulfillment
  • ✓Payment processing fees

Indirect Expenses

  • ✓Marketing campaign costs
  • ✓Platform advertising expenses
  • ✓Overhead and operational costs
  • ✓Customer acquisition costs

Strategic Insights and Best Practices

Monitor Both
Track gross and net ROI
Be Comprehensive
Include all expense categories
Regular Review
Analyze metrics quarterly

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Muhammed Tüfekyapan

Muhammed Tüfekyapan

Founder & CEO of Growth Suite

With over a decade of experience in e-commerce optimization, Muhammed founded Growth Suite to help Shopify merchants maximize their conversion rates through intelligent behavior tracking and personalized offers. His expertise in growth strategies and conversion optimization has helped thousands of online stores increase their revenue.

E-commerce Expert Shopify Partner Growth Strategist

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