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But this department should not be a financial drag. Most Marketing Managers create a Marketing Plan/Budget which includes a list of activities and the associated costs. This document is submitted to Executive Staff and approved. However, the lack of program justification makes it very easy to slash the Marketing budget during tough times. But interestingly, it is during these tough times that Marketing is critical.
An alternate approach is to project ROMI (Return on Marketing Investment) for every proposed activity. ROMI is simply a derivative of Return on Investment (ROI). The formula is as follows – (Gross Profit-Marketing Investment)/Marketing Investment. An example is as follows –
$600,000 | Revenue from Marketing Program |
$120,000 | Gross Margin @ 20% |
$100,000 | Marketing Investment |
20.00% | ROMI |
Programs should only be considered if they generate a positive ROMI or exceed a pre-established level. In this situation, a 20% ROMI would justify proceeding with the Marketing Investment. Now imagine all of your programs with an associated projected ROMI. Clearly the priority would include executing programs with the highest ROMI first.
Now let’s look at activities where a ROMI measure could be calculated --
• Lead Marketing – Programs that support Personal Sales efforts. For this area, a selection of brochures and materials that discuss the services you offer should be available for sales force use.
• Lead Source
• Customer Retention – Programs to strengthen new and past relationships, i.e. thereby minimizing missed opportunities. ROMI should be calculated for all activities to justify their use. Sample activities include -
1. Establish monthly e-mail announcement with link to marketing flyer;
2. Direct Mail, i.e. targeted campaigns to leads retained in your Contact Management system; and,
3. Website / Social Media.
Critical to the roll-out of any program, is the ability to collect pertinent data and accurately track results, to refine the process or adjust projection variables.
What is your experience?
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