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Marketing should be a profitable investment for the business, i.e. have a positive return on investment. But a high ROI is not necessarily a good thing.

First, it could mean that the ad spend is too low. And we could’ve generated more profit by increasing the ad budget. From a business point of view, it’s better to maximize total gross profit than to maximize ROI.

Second, it could mean that our advertising is only targeting warm audiences. Many of these people likely would’ve purchased regardless, so the advertising doesn’t generate incremental (new) revenue. Focusing on customer acquisition may lower the reported ROI, but actually generate more revenue for the business.

The optimal ROI is business-specific and finding it requires trial and error.

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