Return on marketing investment (ROMI)
Also known as: ROMI, return on marketing investment, marketing ROI
Return on marketing investment (ROMI) is the gross profit attributable to marketing minus the marketing cost, divided by that marketing cost.
ROMI = (attributable revenue × gross margin % − marketing cost) / marketing cost × 100%ROMI answers whether marketing made money after paying for itself. ROAS divides revenue by ad spend, so it ignores the cost of what you sold and any spend outside the ad account. ROMI as we define it uses gross profit on the attributable revenue and the full marketing cost: ads, agency, content, tools and the team’s time on the campaign. Other sources sometimes calculate ROMI on revenue; that version is closer to ROAS and should be labelled.
Example
A healthcare provider runs a quarter-long campaign. Ads cost $40,000, agency and creative another $20,000, so marketing cost is $60,000. The attribution model credits the campaign with revenue of $300,000. Gross margin on those services is 35%.
ROAS on ad spend = $300,000 / $40,000 = 7.5. Gross profit = $300,000 × 0.35 = $105,000. ROMI = ($105,000 − $60,000) / $60,000 = 75%.
A ROAS of 7.5 sounds excellent. ROMI shows the campaign returned $0.75 of profit per dollar spent, which is good but far less dramatic. The figures are illustrative.
How to use it
Use ROAS for daily bid and creative decisions inside an ad platform. Use ROMI for budget decisions between channels and for reporting to the finance lead. Fix the attribution window and the cost list before the campaign starts, and state both next to the number.
Common mistakes
- Calling a revenue-based ratio ROMI and comparing it with a margin-based one.
- Leaving salaries, agency fees and production out of marketing cost.
- Counting revenue from customers who would have bought anyway, such as brand search from existing clients.
- Judging long-cycle channels on a 30-day window, before most of their revenue arrives.