Return on marketing investment or ROMI is a metric used in online marketing to measure the effectiveness of a marketing campaign. It examines results concerning the specific marketing objective. ROMI is a subcategory of return on investment (ROI) because it's cost is specific to marketing.
As a percentage ratio, ROMI demonstrates profitability or waste of a concrete sum of money invested. It is calculated with the following formula:
ROMI = ((income from marketing – cost of goods – marketing expenditures) / marketing expenditures) * 100.
If ROMI is less than 100%, then marketing investments were wasteful, if its more than 100%, they were profitable.
For example, we need to understand the effectiveness of a Facebook ads campaign. Monthly spending was $2,400, and the campaign generated sales of $31,200.Taking into account the cost of goods sold totals $24,960, the effectiveness of the advertising campaign is calculated with the formula:
ROMI = ((31,200 – 24,960 – 2,400) / 2,400) * 100 = 160%
In this case, the ROMI equals 160% for the Facebook ads campaign. This means that the campaign is profitable. The campaign, therefore, generated $1.60 of income for every dollar spent on marketing.