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.
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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