What is Return On Investment?
ROI is the yield of an investment, usually expressed as a percentage of that investment. The English term return on investment gives the ratio between the yield and the investment. In other words the ROI measures the financial added value of an activity in relation to the costs involved.
Return on Marketing Investment (ROMI)
Return on marketing investment is a model used to analyze the return on marketing spending, optimization and prediction. Return on marketing investment differs in this respect from return on investment. Return on marketing investment looks at the past, present and future and is also perfectly usable for non-financial calculations and forecasts.
Where is the ROI with effective marketing?
At the time the marketing effectiveness is improved, the ROI is visible in the following areas:
- Lower costs by better communicating (= fewer mail packs to send, fewer people to mail or phone for an equal or higher conversion)
- Higher response rate. Because the message can be better tailored to the receiver, the response rate increases.
- Higher conversion. When the right message at the right time is received by the right person, interest is the highest and the conversion will be increased.
- Effectiveness in the organization. By using information correctly (translated from data) the organization can operate more effectively.
- Better management through better information. When translating data to information it is better to manage on facts rather than ‘ gut feeling ‘ and predictions can be made on the basis of empirical facts.
Decisions can be taken for future marketing activities based on the above data. Analysis of past activities can be used to adjust ongoing marketing activities, hence providing significant real-time value.
In determining the Return on marketing investment, for example, the following non-financial measurements are taken :
- customer satisfaction
- customer loyalty
- customer retention
- NPS (Net Promoter Score)