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Make Return On Marketing Investment (ROMI) your key digital metric

This may be a sweeping generalization, but most marketers and agency people I meet do not understand Return on Marketing Investment.

It is the biggest reason marketing is not taken seriously by senior management.

When you can’t justify our investment using the same language that they evaluate all other investments, you will not get that additional budget you have been asking for.

In the online advertising world, most tend to evaluate and optimize their campaigns based on Click Through Rate (CTR), Cost Per Click (CPC), or Cost Per Application (CPA).

The best way I have found to improve digital campaign performance is to focus on Return on Marketing Investment (ROMI) instead.

Online Return on Marketing Investment

Online Return on Marketing Investment

At its simplest level, Return on Marketing Investment is shown as a percentage and calculated like this:

ROMI = (Revenue – Costs)/Costs

For online advertising, this can be rewritten as:

Online ROMI = (Average Revenue Per Application – Cost Per Application)/Cost Per Application.

Basically if your ROMI is over 0% you are making money for your company, and if it is under 0% your shareholders should be considering your replacement.

The best way to get people on board with this method is to include a ROMI column in your tracking spreadsheet, which shows anything above 0% in green, and everything below in red.

Everyone hates red numbers, and they will do their utmost to find a way to make them go away.

In the recent past I found that simply by including a ROMI column in the digital dashboard and optimizing towards it, a campaign that was unprofitable for 2 years could be turned around to profitability within just 3 months.

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Categories: Digital Marketing, Return on Marketing Investment

Author:Chris Maloney

Chris is a multi-channel marketing strategist and one of Australia's most awarded young marketers.

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3 Comments on “Make Return On Marketing Investment (ROMI) your key digital metric”

  1. Annette Slunjski
    July 23, 2009 at 8:38 am #

    In my experience ROMI is a love-hate relationship – loved when you’re doing good, hated when you’re not but there is always passion driving it.

    Wondering if you attending ADMA Forum – lots of good content around ROI and ‘data-lovin’ strategies. Portrait Software[a client], one of the keynotes on Thurs, has setup a free website that can check existing DM marketing campaigns for wastage and hidden additional revenue – be interesting to hear what you think – http://www.campaigncheckup.com
    Thanks
    Annette

  2. July 23, 2009 at 12:54 pm #

    Agree Annette, ROMI can become a pretty heated discussion sometimes.

    Unfortunately I missed the ADMA Forum this year due to other commitments, but will be at DMA 09 in San Diego in October to see what the best in the world are doing in this space. Keep an eye out as I will be publishing my learnings from the conference.

    Campaign checkup looks like it would be particularly useful for advertisers who dont have the benefit of a large internal analytics department at their disposal, which is a big target market! Great to see Portrait Software pushing the ROMI mantra in the industry.

    Cheers
    Chris

    • Annette Slunjski
      July 23, 2009 at 2:15 pm #

      Thanks, DMA should be great (if not a little overwhelming it’s so big!).

      BTW -The Portrait guys will be in the exhibition (#2645 around the online marketing solutions pavilion) so look them up if you get a chance. The Director of CRM Strategy and Implementation at Merrill Lynch [Portrait client] is also speaking in the Trigger Marketing track on Tuesday afternoon – I’m told he’s very engaging.

      If you haven’t registered yet – if you use discount code AN302 in the registration you’ll get $150 off the conference package, compliments of Portrait.

      Hope you have a wonderful time – I look forward to the updates!
      Thanks
      Annette

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