Glossary

The return on marketing investment (ROMI) describes whether marketing investments, for example the costs of an advertising campaign, have paid off.

What exactly is ROMI used to calculate?

ROMI is a classic financial indicator for marketing controlling. It is a further development of the traditional return on investment (ROI), which comes from the financial sector. It is used to calculate how profitable the marketing department has been within a defined period of time.

How does the ROMI calculation work?

ROMI is calculated by determining the ratio of invested capital to profit:

• The invested capital is the cost of marketing measures, including agency and placement costs (marketing costs)
• The profit is the increase in sales that is attributable to marketing.

The ROMI is expressed as a percentage or as a fraction. The formula for the calculation is:

ROMI = (profit - marketing costs) / marketing costs

A ROMI of more than 1 (or more than 100%) means that marketing has operated profitably. A ROMI of less than 1 (less than 100 %) indicates losses. This means that the higher the ROMI, the more efficiently the marketing budget was used.

What are the problems with calculating ROMI?

ROMI is typically used in companies to justify marketing expenditure. The problem here is that although the costs of marketing measures can be easily determined, it is difficult to measure their direct influence on profit.

This is because the effects of marketing measures can be manifold and it is difficult to attribute their success in concrete terms. For example, it is often not possible to directly attribute an out-of-home subject to the purchase of a product.

For this reason, we at BrandTrust prefer to measure and quantify brand success using the AI method Performance Branding. This avoids the difficulty of having to allocate marketing costs directly to sales growth.

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