What is it? ROMI, or Return on Marketing Investment, is a metric that reflects the financial effectiveness of marketing activities. It allows you to calculate the ratio of advertising costs and profits from promoting goods and services.
How to calculate? To determine ROMI, it is necessary to analyze the company's activities over a relatively long period, have data on expenses, income, profit, and marginality.
The article explains:
The Essence of ROMI in Marketing
When and why rich people data package ROMI is calculated
ROMI formula
What to Remember When Calculating ROMI
What metrics to compare ROMI with
Setting ROMI Goals and Benchmarks
Implementation of marketing strategies based on ROMI calculation results
Advantages and Disadvantages of the ROMI Metric
Common Errors in Calculating ROMI
Ways to Increase ROMI
Frequently asked questions about ROMI
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The Essence of ROMI in Marketing
ROMI (Return on Marketing Investment) occupies a special place in the list of the most important key marketing indicators. It demonstrates the return on investment rate for promotion. This is a universal indicator that does not depend on errors made and such factors as accounting expenses or seasonal changes in business.
This metric only gives an idea of the level of return on investment in advertising. This is the main difference between the ROMI coefficient and the ROI (Return on Investment) indicator. The second metric takes into account the entire volume of costs for creating a product (goods/services): rent, purchase of raw materials and components, staff salaries, etc. In turn, to assess the effectiveness of investments in advertising, you should calculate the ROMI coefficient.
ROMI formula
Analysis of the return on marketing expenses will help to determine the overall effectiveness of advertising activities. At the same time, to compare the profitability of individual promotion channels, it is necessary to calculate the ROI for each of them. This way, you can determine the marketing areas that should be allocated more funds, find out which of them do not need to be financed, since they eat up investments without the desired result. This will increase the profitability of the business by redistributing advertising costs.
The ROMI indicator can be calculated for investments in different types of advertising promotion:
context;
targeting;
SEO;
email newsletters;
outdoor advertising, etc.
In this case, you only need to find out two parameters:
The size of the budget for a specific advertising channel.
The net profit indicator received from it for the same period of time. To calculate it, production costs should be subtracted from the sum of all incomes.
Analysis of the ROMI indicator will help determine the feasibility of investing in a specific promotion channel. Business owners, the head of the enterprise or the marketer can use this metric to make informed decisions on allocating a budget for advertising in the following periods.