The Return On Marketing Investment is one of the most reliable indicators of the success or failure of a marketing campaign, whether it is on the digital or traditional mediums. Learn how to calculate it.
When reporting the actions on a digital marketing campaign, the Return On Marketing Investment (ROMI) is perhaps the most important value. It is a financial concept that is very useful in Digital Marketing. Basically, ROMI tells us if we are getting benefits with the investment we make, for example, in Facebook ads. Or, on the contrary, if we are spending a lot of money but we are not getting profitability from those ads.
It is worth bearing in mind that an ad on a social network can be effective and have a lot of interaction, but not generate more sales. In that case, our ROMI will be negative.
In order to calculate ROMI, we can use the following formula:
ROMI = [(Gross income – Marketing investment) /Marketing Investment] *100
This will allow us to calculate a percentage of income per dollar spent. For example, a 10% ROMI means that you can obtain 10 dollars per dollar spent on a given campaign.
Now, what is a good ROMI percentage? There isn’t an easy answer. It will depend on many factors, from competition in social media for the same audiences, the cost of man-hours and unforeseen events that can for example, take away attention from target audiences, such as breaking news during the duration of the campaign. Some academics situate a good enough ROMI on 2 to 3%, while others claim that you can aim for as much as 5 to 10% or even more. For digital marketing in classic platforms such as Google Ads, Instagram, or Facebook, less than 5% is probably the most common if the parameters are well established.
However, there are other factors that can be taken into consideration. On the one hand, the most popular campaigns end up having much higher ROMIs. It’s a question that seems almost logical. When a campaign becomes very popular, the ROMI should skyrocket. The average ROMI in this case is around $4 per dollar invested.
On the other hand, there is also a relationship between the cost of a campaign and its ROMI. Campaigns that are very cheap tend to generate a stronger ROMI ratio, since in the end they do not need to generate as much revenue to be profitable. But of course, with more investment, more people will be aware of your brand.
And finally, please be careful of not taking ROMI as the ultimate metric for your campaigns since it’s quite difficult to calculate and reproduce with accuracy. Use it along other metrics, such as monthly visitors, Cost per Lead, Cost per Acquisition, Average Order Value, Lead to Close Ratio, etc.