Many organizations gauge the effectiveness of the amount they spend on marketing campaigns by measuring the return they make on marketing investment, which is commonly known as ROMI.
How it works
A subset of ROI (return on investment), ROMI is one of the key calculations businesses use to work out the effectiveness of the money they spend on marketing. ROMI is measured by comparing
the revenue gained against the investment made in marketing, and is used to assess online campaigns, in particular. This calculation, however, only reflects the direct impact of marketing investment on a business’s revenue and fails to take into account other gains,
such as the word-of-mouth effect on social media, which is more difficult to quantify than the more clear-cut response received from advertising or direct mail. As a result, many digital
marketers now factor lag time or brand awareness into their ROMI calculations in order to quantify less tangible benefits and target future campaigns more effectively.
ROMI in practice
The diagram shows how a commercial air-conditioning
company might use ROMI to measure the performance of a marketing campaign. The company spends $2,100 on a direct-mail promotion, which it aims at offices in three major cities to generate sales leads and secure new contracts. The direct-mail brochure contains a contact form offering a 10 percent discount to new clients who respond to the promotion within a specified period of time.
Results
LONG-TERM BENEFITS OF MARKETING INVESTMENT
Some aspects of marketing investment are difficult to measure immediately. The benefits of providing excellent customer service, for example, or investing in research to help marketers retain customers, may not be evident right away but will reap long-term profits.
NEED TO KNOW
❯ 4P3C1E framework Method that uses several variables to calculate effectiveness of marketing campaign
❯ Success metrics Use of standard measure (metric) to help manage marketing process and to assess its performance
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