Calculating the ROI of marketing activities is a priority for many marketing managers. The ROI of marketing is calculated in a different way than the ROI within the context of e.g. purchasing a software application. But, just like the ´conventional ROI´, Return on Marketing Investment (sometimes also called Marketing Return on Investment) is a financial parameter.

Return on Marketing Investment, abbreviated ROMI, is firstly a way to forecast in percentages the return of future marketing expenditures.

But ROMI is also used to analyse and improve the return of campaigns and marketing plans. All of this is done using objective measuring units or metrics.

On this basis decisions are made for future marketing activities, conclusions are drawn about past activities, and adjustments made to current actions or programmes.

ROMI and the calculation of the incremental (future) revenue of your marketing programme

ROMI programmes firstly look at financial results and forecasts, but they are also used for analysing intangible or non-monetary marketing activities.

By ´marketing´ we understand not just brand-related activities but marketing in the broadest sense. From a customer-focused perspective, the objective of marketing - regardless of whether we are engaging in acquisition, retention, sale-oriented activities, lead generation or brand positioning - is to ensure an optimisation of the company´s profit.

ROMI then becomes a model with which we can calculate the incremental (future) revenue and profit for each (additional) euro spent on marketing.

Challenges and key success factors

You immediately see that one of the major stumbling blocks is the translation of all these different marketing objectives into financial results and forecasts.

This vision has many implications for the way a ROMI programme should be set up. For example, a holistic vision of marketing - in which the boundaries between marketing, sales and even other business activities are torn down - is essential. This requires a support by senior management and often a lot of change management.

Using a financial parameter such as ROI is also very new for many marketers and it’s the role of management to convince them that adopting ROMI in the end will benefit both them and their actions. One of the benefits of ROMI is that it enables you to approve marketing programmes faster.

Note that implementing ROMI should not be an excuse to cut down on brand-related spending and to avoid high-risk marketing investments (that also might result in a high return). It is a matter of balance.

Calculate the marketing ROI on a macro- and a micro-level

The above mentioned holistic vision applies just as much for the marketing activities themselves. In order to be effective, therefore, in practice a ROMI programme will - for each type of campaign, each medium used and each marketing objective - have to dispose of systems, methods and models which can relate the impact of these different elements to the sales.

The marketing ROI can be used on both a macro-level (a marketing programme or marketing plan) and a micro-level (a campaign, a medium, a department, etc.). 

What´s more, the best way to measure the ROI of marketing activities on a macro-level is to aggregate the ROI of everything you do on the smallest possible level. Obviously a data-driven mentality, one in which everything that is measurable is translated into KPI´s, is necessary for this.  

The best approach is to take the ROMI down to smallest possible level of the most individual campaign and also do this with the data you acquire about prospects, customers and the different data on the impact and above all the behaviour of these customers, even if they do not appear to be directly ROMI-related.

The tools for measuring the data on the impact of campaigns, media or marketing tools generally also go much further than the acquisition of the data which are strictly necessary for determining the ROMI.