Marketing ROI

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Marketing ROI is a related term to Return on Marketing Investment (ROMI) and is a measure of the effectiveness (see also marketing effectiveness) of various marketing activities. The purpose of marketing ROI is to optimize marketing spend for the short and long term in support of the brand strategy by building a market model using valid, objective marketing metrics. Improving marketing ROI (and ROMI) will lead to improved marketing effectiveness, increased revenue, profit and market share for the same amount of marketing spend.

1 Definition
2 See Also
3 References
4 Interesting Links

[edit] Definition

Marketing ROI differs from Return on Marketing Investment in that it uses the ROI paradigm. Mathematically, both marketing ROI and ROMI provide the same support in the decision making process in choosing more effective marketing activities. ROI however is a language more used with financial counterparts within the organization.

Marketing ROI is related to ROMI and is calculated as follows:

((Incremental contribution margin – marketing investment) ÷ marketing investment) * 100%.

Marketing ROI is also directly related to ROMI when ROMI is measured in contribution margin (mROMI):

(mROMI – 1) * 100%

For example, if a company spends $100,000 on a direct mail piece and it delivers $500,000 in incremental revenue then the ROMI factor is 5.0. If the incremental contribution margin for that $500,000 in revenue is 60%, then the mROMI 3.0 (= 5.0 x 60%). With an mROMI of 3.0 Marketing ROI is 200%.

[edit] See Also

[edit] References

Powell, Guy R., Return on Marketing Investment: Demand More From Your Marketing And Sales Investments (2003) RPI Press. ISBN 0971859817
Lenskold, James, Marketing ROI: The Path to Campaign, Customer, and Corporate Profitability (2003) McGraw-Hill. ISBN 0071413634
Farris, Paul W., Bendle, Neil T., Pfeifer, Phillip E. and Reibstein, David J., Marketing Metrics: 50+ Metrics Every Executive Should Master (2006) Wharton School Publishing. ISBN 0131873709
Schultz, Don E., Measuring Brand Communication ROI (1997) Assn of Natl Advertisers. ISBN 1563180537
Ambler, Tim., Marketing and the Bottom Line (2004) FT Press. ISBN 0273661949
Aspatore Books Staff, Improving Marketing ROI: Leading CMOs on Adding Value, Calculating Return on Investments, and Creating a Financial Impact (2006) Aspatore Books. ISBN 1596224347
Lilien, Gary L., Rangaswamy, Arvind, Marketing Engineering (2004) Trafford Publishing. ISBN 1412022525
Kotler, Philip.; Kevin Lane Keller (2006). Marketing Management, 12th ed.. Pearson Prentice Hall. ISBN 0-13-145757-8.