Marketing Analytics: Return on Marketing Investment (ROMI)

Veronica owns a luxury resort located on the island of Bora Bora, a 12-square-mile island in the western part of the Society Islands of French Polynesia. The resort is a major international tourist destination, famous for its aqua-centric luxury accommodations, hospitality, and plentiful coconut trees. Veronica was interested in determining the profit that her marketing campaigns are generating for her business, so she contacted a consulting firm in Los Angeles, CA, to help her. As a marketing graduate, you are selected to perform this task. You pack your bags and flew to Bora Bora. Upon meeting with Veronica, you suggest that she might want to use Return on Marketing Investment (ROMI) to find out how much profit each marketing campaign is generating. ROMI is a metric used in marketing to measure the productivity of a promotional campaign. It is a subcategory of return on investment, as the expenses here are incurred on marketing. You also comment that by focusing on ROMI, Veronica can help her shareholders move away from the idea that marketing is an expense that can be deducted when the economy is weak. Instead, it is an investment that produces revenue.

In order to calculate ROMI, you ask Veronica to supply you with several figures, including the revenues before each campaign, revenues after each campaign, and marketing campaign costs for television, social media, and website (see below). You explain that revenues after campaign minus revenues before campaign would equal sales growth. Then, the increase in sales would be used in the formula below to obtain ROMI.

ROMI= (Increase in Sales Marketing Campaign Cost) / Marketing Campaign Cost

The figures from Veronica show that revenue before each campaign was $12,000. The cost of each campaign and subsequent revenues are as follows:

Television

Campaign cost: $3,000

Revenue after campaign: $16,000

Social Media (Facebook, Twitter, YouTube, and LinkedIn)

Campaign cost: $12,000

Revenue after campaign: $30,000

Website

Campaign cost: $5,000

Revenue after campaign: $18,000

	A	b	C	D
1		Television	Social Media	Website
2	revenues before campaign
3	revenues after campaign
4	increase in sales
5	Campaign cost
6	ROMI
7	Normal sales growth rate(%)

8

NET ROMI

1. Using the spreadsheet above, enter the attained figures to obtain the sales growth for each marketing campaign. What was your increase in sales for each campaign (television, social media, and website)?

A.$6,000 (TV); $12,000 (Social Media); $2,000 (Web)

B.$4,000 (TV); $16,000 (Social Media); $3,000 (Web)

C.$4,000 (TV); $18,000 (Social Media); $6,000 (Web)

D.$8,000 (TV); $14,000 (Social Media); $4,000 (Web)

2. What was your ROMI for each marketing campaign?

A.33 (TV); 50 (Social Media); 20 (Web)

B.38 (TV); 50 (Social Media); 22 (Web)

C.33 (TV); 45 (Social Media); 10 (Web)

D.36 (TV); 55 (Social Media); 25 (Web)

3. Veronica also informs you that her resort has a normal growth of 6% without the influence of the marketing campaign. You will need to adjust your figures by deducting the 6% from your ROMI to obtain the net ROMI using the formula below:

Net ROMI = [(Increase in Sales Marketing Cost) / Marketing Cost] Normal Sales Growth Rate

What is the net ROMI for each campaign?

A.27 (TV); 44 (Social Media); 14 (Web)

B.27 (TV); 40 (Social Media); 10 (Web)

C.31 (TV); 44 (Social Media); 40 (Web)

D.29 (TV); 46 (Social Media); 12 (Web)

4. According to the data, which marketing campaign was the most profitable?

A.Social Media

B.Website

C.Television