Definition – What is Return on Marketing Investment?
ROMI is a measurement of the effectiveness of a marketing campaign.
It takes a baseline level of business activity and measures it against the business activity from a time when a marketing campaign is running.
The final return is the extra profit above regular business activity less the cost of running the marketing campaign.
Formula – How to calculate ROMI
Baseline Profit = Baseline revenue – Baseline Cost of Goods Sold
Marketing Campaign Profit = Revenue – Cost of Goods Sold
Profit with Marketing Campaign Cost = Profit – Marketing Cost
Campaign Uplift = Profit with Marketing Cost – Baseline Profit
Return on Marketing Investment = (Campaign Uplift / Marketing Cost) x 100%
Baseline Profit = $25,000 – $20,000 = $5,000
Marketing Campaign Profit = $50,000 – $40,000 = $10,000
Profit with Marketing Campaign Cost = $10,000 – 3,000 = $7,000
Campaign Uplift = $7,000 – $5,000 = $2,000
Return on Marketing Investment = ($2,000 / $3,000) x 100% = 0.6667 x 100% = 66.67%