ROMI is essential for the assessment of your marketing activities. If the ROAS is 100%, you only paid off your expenses but made no profit. If the ROMI and the ROI equal 100%, it means that you earned twice as much as you spent. It’s essential not to mistake the ROMI, ROI, and ROAS for one another, as it may lead to grave mistakes. The primary objective of this formula is to find out if a company makes profits using particular marketing tools. It only considers your expenses on particular advertising campaigns. ROAS (Return on Advertising Spend) is the return ratio of your advertising expenses. You need to consider all project expenses and revenues it generates to calculate the ROI. Unlike the ROMI, that only considers marketing expenses, the ROI helps you evaluate the overall profitability of your project considering all investments. ROI is the return ratio of all investments. Let’s figure out why these metrics are different. The ROMI is often mistaken for ROI and ROAS. Here’s an example of a Captain Calculator: They are simple and need your marketing expenses and revenues to calculate the metric. There are numerous ROMI calculators on the Internet. Use online calculators or Excel spreadsheets to mitigate these risks. These slips may influence your calculations dramatically, and you may get unreliable data. However, you may miss some marketing expenses or get confused. The major advantage of the ROMI formula is that it’s easy to calculate. If you know your ROMI value, you can calculate your perfect cost-per-click, product price, average order value, and sales value to ensure your investments pay off. Now you can reallocate your investments into more cost-effective channels. Suppose you figured out what channel performs best in your business. The ROMI may differ depending on the reporting period and won’t show an accurate picture. You’ll account for marketing costs in one month and the income in another. Customers may see your ads in these industries and only purchase in several months. If you are in real estate, auto business, or selling expensive household appliances, we don’t suggest you rely on the ROMI. In that case, your ROMI may decrease, though it has nothing to do with your ad campaigns. Suppose you launched ads, and your best sales rep decided to quit, or you faced supply issues. When calculating the ROMI, consider all factors influencing your sales. It lets you quickly optimize your advertising and invest in more cost-effective channels. The ROMI demonstrates how various campaigns influence your sales. We found out that Instagram ads were cost-effective while other channels were not. The negative ROMI means we earned less than we spent. Your income is $18.ĭeduct the advertising expenses from the income: 18 - 69 = −$51. Let’s say customers we acquired via Google Ads only bought 2 lamps. The ROMI of 95,6% means emails are not cost-effective, but at least we managed to recover our investments. Then, deduct advertising expenses from your income: 45 - 23 = $22.ĭivide the number obtained by the number of advertising expenses and then multiply by 100%: Suppose customers bought five lamps after they got emails from you. The ROMI is 291,3%, meaning that Instagram ads are cost-effective as they generate about 2,9 dollars for each dollar invested. Then we divide the number obtained by the number of advertising expenses and multiply by 100%: Then let’s deduct the number of advertising expenses from income: 270 - 69 = $201. Let’s say customers from Instagram bought 30 lamps for $14 each.
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