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Definition

Return on marketing investment (ROMI) is the contribution to profit attributable to marketing (net of marketing spending), divided by the marketing invested. It is not like the other "return on investment" metrics because marketing is not the same kind of investment. Instead of moneys that are "tied" up in plants and inventories, marketing funds are typically "risked." Usually marketing spending will be deemed as justified if the return is positive.[1]

Purpose

The purpose of the ROMI metric is to measure the rate at which spending on marketing contributes to profits.

Construction


      Return on marketing investment (%) = 100 x [{Incremental revenue attributable to marketing ($) x Contribution margin (%) - Marketing spending ($)} ÷ Marketing spending ($)]
      Note: Marketing spending is typically expensed in the current period.

See also


References

  1. ^ Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; and David J. Reibstein (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance (Second Edition). Upper Saddle River, New Jersey: Pearson Education, Inc. <http://www.amazon.com/Marketing-Metrics-Definitive-Measuring-Performance/dp/0137058292>


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