Return On Marketing Investment (ROMI)

What is Return On Marketing Investment?

The Return On Marketing Investment metric measures how much revenue a marketing campaign is generating compared to the cost of running that campaign. Effective marketers are driven to connect their time, energy and advertising spend with results that contribute to company growth. This KPI answers the question, “are we recouping the time and money we spent developing and executing our marketing campaigns?”

How to calculate Return On Marketing Investment

ƒ (Sum(Attributable Revenue) - Sum(Campaign Investment)) / Sum(Campaign Investment)

Favourable trend

Up is positive

Complexity level:
Intermediate

Date created: Feb 26, 2019

Latest update: May 29, 2019

Tell me more about this metric

Despite the importance of Marketing Return On Investment (ROMI), this can be a difficult metric to measure and monitor. Measuring the ‘investment’ side of the equation is typically straightforward. You track hours spent planning and executing marketing campaigns, and dollars spent advertising online and offline. But measuring returns on a marketing investment is more complicated for several reasons.

First, most marketers today run a wide variety of campaigns simultaneously. This can make it difficult to stay on top of spending and the performance of each individual campaign.

Second, in our fast paced digital world, marketing campaigns can take on a life of their own, and it can be difficult to monitor and measure the effects of marketing messages that are being spread by an external audience.

And connecting the dots between marketing campaigns and the achievement of marketing goals can be challenging. Multiple marketing messages often reach a target audience through a variety of marketing channels: which one resonated? What call to action incited action?

Faced with these challenges, the most effective way to measure ROMI is to combine and compare data sets from a variety of sources (Google Analytics, Google Adwords, your Marketing Automation Platform and CRM) to identify data correlations and trends over time. If you’re seeing that increasing your Adwords spend is consistently coinciding with a bump in website traffic, and that the bump in website traffic is leading to more leads and more sales, you can break that conversion loop down and come up with return on investment KPIs as straightforward as this:

New Website Users/Trial Start: 25
Adwords Spend/New Customer: $35

There are many possible ‘returns’ on marketing investments. A marketer might target ‘top of the marketing funnel’ returns such as increased brand mentions online, or new website traffic. They may be interested in driving more leads through the middle of the funnel, by targeting new trial starts or new newsletter subscriptions, for example. Or they may be directly targeting the marketing goal that connects all others: new customers and new sources of revenue. Whether the marketing target is top of the funnel or bottom of the funnel, short-term or long-term, measuring marketing’s progress toward its goals against the time and money that has facilitated that progress is critical.

Example

Let’s say we have a company that runs a $10,000 campaign for a month. The attributable sales growth is $15,000. The calculation goes:

Return on Marketing Investment = ($15,000 - $10,000) / $10,000 = 0.5 or 50%

What do others say?

4 Ways of Measuring Marketing ROI, Sylvia Jensen Search Marketing: How to best benchmark and measure ROI, Neil Davey How to Calculate ROI of a Marketing Campaign, Andrew Beattie

Metrics related to Return On Marketing Investment

Customer Acquisition Cost
Marketing Qualified Leads
Advertising Costs