What is the return on marketing investment?

The return on marketing investment (ROMI) is a model for measuring the effectiveness of marketing campaigns. The aim of this model is to maximize the return on investment in marketing or a better alternative. It is also a key strategy for brand creation and development. According to this model, short -term returns are relatively easy to calculate, but long -term returns are more intangible. This means that short and long -term returns require various calculations and take into account various marketing and socio -economic factors. At its most basic level, this could be a campaign for a leaflet for a new type of detector of mail order orders. The cost of a marketing campaign and its directly related sales would be known in this example.

The formula for calculating the return on marketing investment is a gross profit of minus investment, divided by investment. If a campaign for flyers that cost $ 250 (USD) generated $ 1,200 on saleThe detergent, which cost $ 900 for production, would have a rough profit of $ 300. Gross profit of $ 300 minus campaign cost of $ 250 equals $ 50; This divides $ 250, creating a return on marketing investment of 0.2 or 20 percent. In principle, this means that every 10 USD spent on the advertising campaign created another 2 USD in net profit. If the campaign generated sales of only $ 600, which would result in a rough profit of $ 200, Romi would be calculated by a minus-20 percent, which means that the company has actually lost money because it is more for a leaflet campaign than it would make gross profits.

The most difficult element of this equation counts on additional profit and investment costs. In the above example, the brand awareness comes only from leaflets, but most marketing campaigns use different methods such as posters, television ads, radio spots, newspaper advertising and advertising on social media websites. Businesses often do not know exactly how much new income is generateda specific method of marketing.

This means that sales and marketing departments are left to calculate profits and investments. This calculation requires the costs of the goods sold (COGS) and the cost of the campaign production. Marketing requires research, production, work and location. This becomes more complicated sophisticated marketing campaigns, more products and more sales strategies.

The disadvantage of short -term estimates of the return on marketing investment is that they do not take into account long -term revenues. Long -term revenues are more difficult to calculate because it thzahrna awareness of the brand, the purchase of impulses and oral advertising. The results of long -term metrics are less reliable because many variables are involved.