Return on marketing investment

Return on marketing investment

Since almost everything can be measurable on the web, CMOS, digital marketers, and marketing teams often rely on numbers when it comes to benchmarking their results. Calculating the return on investment of digital efforts can allow marketers to validate their hypotheses, optimize their actions, or better target their marketing objectives. 

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What is return on marketing investment?

The Return on Marketing Investment (ROMI) calculates how much revenue marketing efforts generate compared to the marketing spend. It's a great benchmark for marketing performance and it is also used to justify total marketing activities, better distribute marketing budgets, and measure return on advertising spending.

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How to calculate marketing return on investment?

The most basic way to calculate the ROI of a marketing campaign is to take the sales growth from a business or product line, subtract the marketing costs, and then divide it by that same marketing cost.  

If you want to measure ROI for longer-term projects, you can do it by comparing future asset value or the projected cash flow from spending assets.

The marketing ROI calculation (ROI formula)

 

Total revenue - marketing expenses / marketing expenses = ROMI

What is a good return on marketing investment?

But if you want to maximize your ROMI, you need to be able to calculate it across every sub-channel of your business. In this case, marketers use attribution. Marketing attribution is the identification of a set of user actions (called touchpoints, or user journeys) your clients will go through before buying. It helps assign which channels should get the credit for the sale. 

With that being said, the rule of thumb for marketing ROI is typically a 5:1 ratio, with exceptional ROI being considered at around a 10:1 ratio. But because every organization is different, it’s important to consider the unique overhead costs, margins, and industry factors and standards unique to the sector of activity.

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What is a bad return on marketing investment?

Anything below a 2:1 ratio is considered not profitable, as the costs to produce and distribute goods/services often mean organizations will break even with their spending and returns. Other metrics to consider when looking at the bad impact of marketing investment are the churn rate, organic sales, and click-through rate. These can easily be found in your Google Analytics account or any CRM you may use. 

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Return on marketing investment KPI examples & templates

From digital marketing, PPC and email marketing, these reports give you a good view of all your online marketing strategy metrics and overall online performance. 

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Digital marketing report template Digital marketing report template

From SEO to social media and PPC, this report gives you a good view of all your online marketing strategy metrics and overall online performance.

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PPC report template PPC report template

Check your campaign cost, conversion rate, ad spend, gross profit and more, from all your marketing channels. You can also track this data alongside your business metrics and industry benchmark.

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Email marketing report template Email marketing report template

A report with all the most important metrics for your email marketing analytics, like click-through rate, open rate for individual campaigns, number of subscribers, and much more. 

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Return on marketing investment cost best practices

Here are some of the best practices you should keep in mind to improve your return on marketing investment (ROMI). 

Return on marketing investment cost best practices

step 1 icon Get to know your target audience

To optimize your ROMI, you should definitely know your personas better than you know yourself! Knowing exactly who you’re talking to, but also what their digital habits are, you will be able to make better marketing initiatives, therefore optimize your expenditures. It could also help your brand awareness in the long run. 

step 2 icon Use A/B testing

Although looking into a crystal ball to determine exactly what will convert your customers would be nice, it’s not yet possible. Instead, we recommend A/B testing, which is basically creating 2 different ads or landing pages to see which of them converts best. Bottom line, you could try to post on different time periods or to different market shares. 

step 3 icon Track it alongside other metrics

In order to get a better picture of the effects of marketing, you should calculate the ROMI alongside other metrics, like cost per acquisition, cost per lead, conversion rate, and customer lifetime value (CLV). Having all of these numbers will allow you to get a broader view of your spending attribution and make changes if needed. 

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Return on Marketing Investment Synonyms

Although Return on marketing investment is widely used, there are multiple synonyms that can be used. Here are a few: 

Return on investment (ROI), Return on advertising investment (ROAI), Return on ad spend (ROAS), Return on advertising spend (ROAS), Marketing return on investment (MROI), Marketing ROI, Return on investment (ROI) of Marketing, Campaign return on investment (CROI)

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