ROMI stands for Return on marketing investment. You can also see it labelled as mROI or marketing ROI. It’s commonly referred to by businesses, there are countless YouTube videos about it, entire courses on ROMI and how to improve it. So, what exactly makes it so important? For starters, it’s probably the single most versatile way to measure the true efficiency of your marketing and advertising concepts in real-life. But is it worth that much attention? Perhaps the significance of ROMI metric is overrated? Or is all the attention well deserved? Let’s look at some facts, interesting numbers and find out!
Marketing is an area that‘s notoriously hard to measure
Marketing for businesses is always an area that’s shrouded with mystery. Just like a modern-day alchemist, the advertising and marketing manager is trying to figure out a formula that works. He or she is constantly tweaking and changing things to generate the most exposure, engagement and best results.
However, ads and marketing campaigns have very different goals. For example, there are ads that promote a campaign and a goal. They aren’t necessarily aimed at generating more revenue. Their goal is to raise brand awareness or improve brand penetration, etc.
On the other hand, you have so many different marketing methods (SEO blog posts, TV ads, banner ads on the web, physical ads, radio marketing, e-mails, etc.), that putting it all in one pot and trying to figure out the exact return is quite manual-labour-intensive. So, not everyone bothers. Some companies, for example just spend a fixed amount of money to upkeep things like SEO content or Google ads without checking too much on how it works for them. That’s where they miss a lot of opportunities to increase their revenue.
Even if mROI (ROMI) gets difficult to calculate, you must do that in order to optimise marketing processes and have more effective marketing.
Let's check the formula for ROI calculation.
Formula for ROI calculation
ROI = (Net Profit / Investment) * 100
So, you need to separate the numbers for net profit and your initial investment into advertising programmes.
But, how do you know when the figures are great and when can they be improved? It’s hard to say because ROMI varies by industry. Let’s look at the general concepts first, and then move over to exact figures.
To help you understand how mROI works, here are two different charts:
This figure shows that when you utilise a tailor-made marketing platform, you can gradually increase your ROMI. However, the growth is almost always very quick in the first 45-50 days and then the graph reaches a plateau for the foreseeable future. This means that your ad strategies will likely show their efficiency within 2 months’ time. From then, you can opt to increase spending if the ROMI index is good or cut the programme altogether. If you do rogue advertising and don’t use apps and platforms that optimise, it could take a lot longer for the programme to show results. This brings us to our second chart.
Here we see that more than three quarters or 77% of marketers will begin measuring digital ROI within 1 month but not quicker than after 1 week. This means that you shouldn’t be jumping to conclusions too early. Allow the campaign to gain momentum and only measure the performance after a while.
Making conclusions from ROI numbers
Different marketing methods provide very different results and outcomes. Discount codes differ from e-mail marketing, and vice versa. The same applies to all other marketing methods. Each of them has its own limitations. Just as an example - you can’t expect to have a 50% ROMI on email marketing.
Since the average CTR for emails is only 2.6% (per Campaignmonitor), realistic mROI seems closer to 10-20% (1.10-1.20 USD earned per 1 USD spent).
However, other marketing options like SEO and social media ads (mostly related to novelty drop-shipping items, as well as SaaS), can exceed 250% without too many worries. For example, Facebook lists ROAS (return on ad spend). The figure shown in your Facebook ads interface can highlight the return on your ad expenditures. Something like 2.5 (or 250%) is considered sub-par or modestly decent. This means that you should expect to earn 250 USD for every 100 USD spent on advertising.
There are many guides and courses online which claim to help achieve ROAS of over 1500%. It is possible yet not sustainable in the long run.
Nevertheless, emails, whilst with smaller returns, are almost always a guaranteed benefit, given you invest in good copy. On the other hand, social media ads can be hit or miss. You need to develop a content strategy, carry out content planning, design stunning visuals in order to achieve high mROI (ROMI) for social media ads.
All in all - the final ROMI figure can help you decide whether the ad campaign was successful or not.
What can your business do to have higher ROMI figures?
If you are able to measure your ad spending and revenue, generated from those ads, make sure to calculate ROMI on a monthly or two-month basis.
Set realistic goals for improvements. Try to gather data on your competitors and set similar or slightly higher goals to begin with. Make sure those goals are achievable and fit into a specific timeframe, otherwise they will be useless.
Do A/B testing as much as possible. It matters not only what you say but how you say it, so trying out different ad models can help determine the best strategy.
Do everything else you can to convert visitors who are potential or undecided customers. You can use Atlasmic
to proactively start a Live chat conversation with a website visitor, offer free guides and insightful blogs, discount codes, etc. This creates a warmer customer experience which will more often than not, result in an immediate sale or a sale down the road. It’s worth investing in because it guarantees conversions.
All in all, ROMI is a crucial metric that shows how effective your ads are. By calculating mROI, you can determine whether the marketing campaign was a flop or not. Don’t forget to set realistic expectations for every different marketing method and allow time for data collection and analysis. Implement tools to help out with potential and undecided customers to give your marketing campaigns that slight boost in order to convert!
So, we hope this was a helpful guide that showed you why ROMI is important and worth your attention.