ROMI Calculation Options
Posted: Sun Jan 19, 2025 6:09 am
ROMI for the period
To do this, we take profit and advertising costs for a certain period of time. The periods can be arbitrary (month, quarter, year).
It is important that revenues and marketing expenses are accounted for at the same intervals, and that there is sufficient sales data taking into account the industry specifics of the business. For example, in Direct, campaign analysis is carried out after reaching 1,000 demonstrations or 100 clicks.
ROMI in terms of product cost (including margin)
The latter is the difference rich people data package between the selling price and the costs of production and distribution. The margin has a monetary value.
To calculate it, the cost price of the product must be subtracted from the income received, assuming constant marketing expenses. The result will allow you to determine the optimal product range positions for advertising promotion from the position of the highest margin.
Since the difference between the selling price and the cost price is directly dependent on sales volumes, this indicator is dynamic. In this case, marketing can intensify its efforts to ensure high margins during periods of business decline.
ROMI in the context of sales marginality (margin to revenue ratio)
Let's consider the features of this indicator. Marginality is the share of profit in total income (in percent; maximum - 100%). Marginality is relative, it is the amount of profit from each ruble earned.
If seasonal fluctuations lead to a decrease in margin, then the marginality is unchanged or even increases. The percentage of profit in total income demonstrates the profitability of the product.
Marginality shows the efficiency of a business. It can be used to find out the break-even point. This is important in terms of ROM application: this is how marketing efficiency is linked to business marginality.
Let us take a closer look at which indicators should be classified as expenses or income for inclusion in the formula.
Read also!
"32 Methods of Finding and Attracting Clients"
Read more
Enterprise income
Marketing revenues. These include revenues from specific marketing activities, without taking into account the organization's gross income for the same period.
Profit. This is the indicator from specific marketing activities. Ideally, this variable provides more accurate information than revenue. This is because business goals are usually profit-oriented.
The level of revenue growth in relation to the base sales volume. This is a comparison of the total income received with the indicator that could have been without a specific marketing event. It is advisable to take into account the level of income growth in the formula in the case when not all revenue is directly related to advertising campaigns.
The conditional value of conversions in the sales funnel. This is an indicator of predicted sales, formed on the basis of conversion rates that were in the past. It is advisable to include this variable in the formula instead of sales when the profitability of sales is unknown. For example, salespeople do not combine sales with a specific source of leads attracted by marketing. Example: the average profit from a product is 4,000 rubles, the conversion rate from lead to purchase is 12%. Then the conditional profit from one lead is 480 rubles. Instead of profit, you can enter this conversion value into the formula, multiplied by the number of potential clients from the PR channel.
Business Value: Shows the change in the market value of a brand.
To do this, we take profit and advertising costs for a certain period of time. The periods can be arbitrary (month, quarter, year).
It is important that revenues and marketing expenses are accounted for at the same intervals, and that there is sufficient sales data taking into account the industry specifics of the business. For example, in Direct, campaign analysis is carried out after reaching 1,000 demonstrations or 100 clicks.
ROMI in terms of product cost (including margin)
The latter is the difference rich people data package between the selling price and the costs of production and distribution. The margin has a monetary value.
To calculate it, the cost price of the product must be subtracted from the income received, assuming constant marketing expenses. The result will allow you to determine the optimal product range positions for advertising promotion from the position of the highest margin.
Since the difference between the selling price and the cost price is directly dependent on sales volumes, this indicator is dynamic. In this case, marketing can intensify its efforts to ensure high margins during periods of business decline.
ROMI in the context of sales marginality (margin to revenue ratio)
Let's consider the features of this indicator. Marginality is the share of profit in total income (in percent; maximum - 100%). Marginality is relative, it is the amount of profit from each ruble earned.
If seasonal fluctuations lead to a decrease in margin, then the marginality is unchanged or even increases. The percentage of profit in total income demonstrates the profitability of the product.
Marginality shows the efficiency of a business. It can be used to find out the break-even point. This is important in terms of ROM application: this is how marketing efficiency is linked to business marginality.
Let us take a closer look at which indicators should be classified as expenses or income for inclusion in the formula.
Read also!
"32 Methods of Finding and Attracting Clients"
Read more
Enterprise income
Marketing revenues. These include revenues from specific marketing activities, without taking into account the organization's gross income for the same period.
Profit. This is the indicator from specific marketing activities. Ideally, this variable provides more accurate information than revenue. This is because business goals are usually profit-oriented.
The level of revenue growth in relation to the base sales volume. This is a comparison of the total income received with the indicator that could have been without a specific marketing event. It is advisable to take into account the level of income growth in the formula in the case when not all revenue is directly related to advertising campaigns.
The conditional value of conversions in the sales funnel. This is an indicator of predicted sales, formed on the basis of conversion rates that were in the past. It is advisable to include this variable in the formula instead of sales when the profitability of sales is unknown. For example, salespeople do not combine sales with a specific source of leads attracted by marketing. Example: the average profit from a product is 4,000 rubles, the conversion rate from lead to purchase is 12%. Then the conditional profit from one lead is 480 rubles. Instead of profit, you can enter this conversion value into the formula, multiplied by the number of potential clients from the PR channel.
Business Value: Shows the change in the market value of a brand.