All of marketing keeps companies attracting customers. Retail business success depends on marketing investment effectiveness. Return on Marketing Investment (ROMI) measures marketing investment profitability. This universal indicator determines the profitability of all business promotion financial efforts. Unlike ROI, ROMI measures the success of each advertising channel individually. The metric becomes more informative. ROMI measures advertising/marketing tool ROI. Its universality lies in its assessment of marketing effectiveness without considering related factors like seasonality of demand for goods, rental costs, and employee compensation. All these factors make ROMI useful for any business, whether it’s a gambling website https://www.spinia.com/en-CA or a huge marketplace with daily-used products.
ROMI can be used for short-term and long-term strategic decisions. Short-term shows the effectiveness of each ruble in a customer attraction channel. Long-term shows how marketing enhances brand promotion.
A merchandise business relies on short-term ROMI. Let’s learn why we calculate this indicator, its pros and cons, and how to increase ROMI.
Marketing Costs and ROMI
Marketing costs include all advertising and promotion expenses. Such as costs:
Maintaining store social media pages/promotion.
Online store creation and SEO promotion.
Contextual ads.
Targeted ads.
Blogging.
Notifications by email.
Browser and messenger push notifications.
Internal market promotion.
General method for assessing marketing investment profitability:
ROMI exceeds 100%. Investment in advertising and promotion yielded high profits.
Total ROMI is 100%. Its advertising investment paid off as revenue doubled.
ROMI is below 100%. Advertising income was low.
0% ROMI. Marketing breaks even—no income, no loss.
Negative ROMI. Marketing investments lose money, so the company lost.
Count ROMI?
Merchants, including e-commerce ones, must calculate ROMI as a key performance indicator. Especially when selling mass merchandise with a short transaction period. Online clothing stores are more important to calculate ROMI than home building services because this indicator won’t be informative for complex, expensive products with long transaction cycles.
The strategic purpose of ROMI is to determine marketing profitability. Decomposing this key task into smaller ones lets you use ROMI:
Assess promotion channels’ effectiveness.
Assess Black Friday and local sales promotions.
Rethink advertising tools and channels.
Rearrange the advertising budget to boost revenue.
Forecast channel profitability with investment increases or decreases.
Try new promo channels.
Compare channel investment profitability.
Improve tools to reach the target audience by understanding their interests.
Judge the sales and promotion departments.
Provide business management with informative and convincing marketing strategy refinement reports.
Pros and Cons of ROMI
No tool or metric has only benefits, just like there is no silver lining. Like other metrics, ROMI has pros and cons.
Pros:
Quite simple formula. A marketer or small business owner without a specialist can calculate ROMI using analytical data.
Variability. ROMI can calculate the breakeven point for each marketing channel or the maximum advertising clicks that will make investments profitable.
Informativeness. No matter how it’s calculated, this metric shows advertising ROI, which is crucial for retail.
Cons:
A little superficial. As mentioned, the ROMI ignores non-promotional business expenses like manufacturing and purchasing. Using this formula alone to estimate a business’s profitability can yield a significantly different result.
All economic indicators, including ROMI, must be counted periodically. The fact that most marketing metrics involve humans does too. For instance, if the top sales manager quits immediately after launching an advertising campaign in a new promotion channel, ROMI may decrease, but not the quality of the campaign.
A few practical tips
Distribute advertising funds. Turn off ineffective promotion channels and invest in profitable ones. You can make more profit without increasing the advertising budget.
Customer journey tracking. Record and analyse all touches to determine where and how to improve the sales funnel. Determine where people are leaving the funnel, what is stopping them from buying, and fix it.
Revise advertising ads. All advertising messages should be relevant to your target audience to increase traffic, lower click costs, and lower customer acquisition costs, increasing ROMI.
Improve your online store’s usability. You won’t lose interested buyers if they can’t figure out how to find what they want on the website or how to pay.
Fix online store technical issues. Long page loads, unloaded images, and incorrectly displayed mobile pages lose users; fixing them will boost conversion rates.
Target conditionally free organic traffic. High-quality SEO, semantic core expansion, and key phrases that attract new customers will get the site to the top of thematic search results.
Communication should be comfortable. If the user leaves during order placement and manager communication, improve communication. Sales managers should know the online store’s products and services and interact with customers well.
Gain sales department efficiency. For instance, reducing the time it takes to call/wait for a manager can boost sales and ROMI.
Use various channels to attract customers. Test the channels you’re not using to see if they’ll give you the best response and profit.
Work to raise your average bill. To charge a single customer more, use upsells and cross-sells.
Summary
Advertising and promotion spending returns on marketing investment (ROMI). E-commerce and other merchandise businesses that don’t have variable costs use the metric most often. ROMI provides valuable analytics and helps you manage your marketing budget. Though not the only tool, it’s essential for marketers. Given the decision-making time and marketing investment return, ROMI should be calculated periodically. The most important thing to calculate ROMI is to collect complete analytics, including the customer journey, and not mix it with ROI.