Return On Marketing Investment
Return on marketing investment (ROMI) is the contribution attributable to marketing (net of marketing spending), divided by the marketing 'invested' or risked. ROMI is a relatively new metric. It is not like the other 'return-on-investment' metrics because marketing is not the same kind of investment. Instead of moneys that are 'tied' up in plants and inventories, marketing funds are typically 'risked.' Marketing spending is typically expensed in the current period. The idea of measuring the market’s response in terms of sales and profits is not new, but terms such as marketing ROI and ROMI are used more frequently now than in past periods. Usually, marketing spending will be deemed as justified if the ROMI is positive. In a survey of nearly 200 senior marketing managers, nearly half responded that they found the ROMI metric very useful.
The ROMI concept first came to prominence in the 1990s through the work of Gary Lilien and Philip Kotler in their encyclopedic book Marketing Models (1992) and also Robert Shaw in Marketing Accountability (1997). The phrase "return on marketing investment" became more widespread in the next decade following the publication of two books Return on Marketing Investment by Guy Powell (2002) and Marketing ROI by James Lenskold (2003). In the book "What Sticks: Why Advertising Fails And How To Guarantee Yours Succeeds," Rex Briggs suggested the term "ROMO" for Return-On-Marketing-Objective, to reflect the idea that marketing campaigns may have a range of objectives, where the return is not immediate sales or profits. For example, a marketing campaign may aim to change the perception of a brand.
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