What is Return On Marketing Investment?
The Return On Marketing Investment (ROMI) 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)
If a company runs a $10,000 campaign for a month, and the attributable sales growth is $15,000, the ROMI would be;
ROMI = ($15,000 - $10,000) / $10,000 = 0.5 or 50%
More about this metric
Despite the quintessential importance of ROMI, it can be difficult to measure and monitor. Measuring the investment side of the equation is fairly straightforward. You track hours spent planning and executing marketing campaigns and dollars spent securing advertising space online and offline. Measuring returns on marketing investments is more complicated for a few 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, making it difficult to monitor and measure the effects of marketing messages that are spread by an external audience.
Lastly, and in relation to the first two obstacles, 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. It can be hard to tell which messages resonated and incited action.
Faced with these challenges, the most effective way to measure ROMI is to identify data correlations and trends over time by combining and comparing data sets from a variety of sources, for example, Google Analytics, Google Adwords, your Marketing Automation Platform and CRM. If you notice 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 the conversion loop down and come up with straightforward return on investment KPIs, for example:
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 might want to drive more leads through the middle of the funnel, for example, by targeting new trial starts or new newsletter subscriptions. Or they may be directly targeting 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, it’s critical to measure marketing’s progress toward goals against the time and money it took to achieve them.
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