Return on Marketing Investment

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Return on Marketing Investment
ROMI or Return on marketing investment is a metric used to measure the effectiveness of a marketing campaign.
o By applying formulas, marketers can evaluate the performance, profit, and impact of the marketing effort.
o The insights gained by looking at the metric can help create future strategies with a data-driven approach for smarter
decision making.
o ROMI is a subcategory of ROI (Return on Investment) because here the cost is calculated for marketing only.
Information components to measure ROMI
o The Cost of the Campaign
o The amount of profit that we would
normally make without the campaign
 Normal/expected sales X
 Normal/profit margin (price-cost)
=
 Normal/expected profit (called a
baseline)
o The amount of profit that we made with
the campaign
 Sales during the campaign C
 Profit margin (Price-cost, whict
may change)=
 Campaign profit (Hopefully will be
more)
Components
Without
Campaign
With Campaign
Unit Sales 10.000 12.000
Margin $15 $15
Gross Profit $150.000 $180.000
Campaign Cost N/A $ 20.000
Net Profit $150.000 $160.000
Extra Profit $ 10.000
ROMI 50%
Components
Without
Campaign
With Campaign
Unit Sales 10.000 16.000
Margin $15 $10
Profit $150.000 $160.000
Campaign Cost N/A $ 50.000
Extra Profit $ 10.000
ROMI 20%
Ads campaign Discount campaign
ROMI = ((income from marketing – cost of goods – marketing expenditures) / marketing expenditures) * 100.
If ROMI is less than 100%, then marketing investments were wasteful, if its more than 100%, they were profitable.
Simple examples