Marketing Return on Investment: 5 Things to Know, Marketing Return on Investment: 5 Things to Know

Marketing Return on Investment: 5 Things to Know

When marketers or anyone else, for that matter, are responsible for spending money to generate revenue, they should be able to know whether that investment is creating them any business or not. When talking about marketing return on investment, as opposed to regular ROI, several fundamental differences make the former stand out. Below are five things that you need to know about it.

What Is Different About Marketing Return on Investment?

The Return on Marketing Investment (ROMI) is a metric that represents the total profit generated by your marketing efforts, divided by the amount of money invested, in the first place. So far so good, but unlike regular return on investment, where the money is generally tied up in various inventories (capital expenditure), in marketing, this initial investment is usually risked. 

Metrics

Marketing, advertising, and PR are, most often than not, black boxes that don't provide any real insight as to how well they work. It means that these activities can become money pits if there are no accurate tools capable of determining the efficiency of these practices. One way of avoiding this problem is to hire a professional PR team that has the necessary tools and know-how to use data and metrics that prove and measure their effectiveness.

One can look at these practices as a sort of “portfolio of experiments.” Good marketing, advertising, and PR firms should look more like a scientific laboratory than an art gallery. PR experts need to look at the data generated and use it to maximize their results.

ROMI Across Different Channels

There's a varying degree of difficulty when it comes to measuring marketing return on investment on different channels. The more traditional media such as print, television, or radio are generally harder to quantify. Luckily, however, more interactive, web-based media such as social media and email marketing are less so.

With the ever-increasing demand for digital marketing, marketers or tech-savvy business owners can get a rough estimate of the ROMI before they even invest their money. By making use of various analytics tools, they can get a better understanding of their current web traffic, conversion rates, and average sale.

Long and Short-Term Marketing Return on Investment

There are two ways of looking at ROMI - over the short and long-term. On the one hand, short-term return on investment should be visible within hours, granted the strategy employed is a good one. Posts on social media will become viral in a matter of hours, not days or weeks. Data-driven decisions significantly increase the chances of this happening to you.

Over the long-term, however, things are less quantifiable but equally as important, nonetheless. When talking about long-term marketing ROI, we are referring to things like brand awareness and reputation, purchase intent, conversions, and consideration.

The 5:1 Ratio

There is always more success to be had if there is a goal before any action we take. When it comes to the ROMI, we should consider using a simple ratio. The reason for this is because ratios are easy to use and understand, and as long as the metrics are being followed and utilized, we can quickly determine if our marketing campaigns are successful or not.

In short, this is a revenue-to-marketing cost ratio that shows the amount of money generated for every dollar spent on our marketing efforts. Concerning ROMI, a reasonable rate is 5:1, meaning that for every dollar spent, you should be getting five dollars back. A higher ratio is definitely possible but should not be an expectation; especially given the fact that these target ratios can be dependent on other variables such as your cost structure or the industry you operate in.

Conclusion

Even if your marketing return on investment is harder to quantify and keep track of than a standard ROI, it is, nevertheless, an important step that you need to make to make sure that the money you invest will not go to waste. Instead of marketing in the dark, consider hiring a professional to help you out in this endeavor and lead your marketing strategies to success.

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