difference between roas and romi

Measure, Understand, Control and Improve are the four simple steps for every marketing campaign has to go through to reach its goals.

Measuring the effectiveness of your online marketing campaign is the first step towards optimizing it to reach your online marketing goals. Everything starts with establishing the right performance indicators to make sense of the analytics data, thus judge the performance of the campaign and then finally make necessary tweaks to improve the campaign.

So you are spending your dollars on ad campaigns and want to measure your ROI, how would you go about it? Two ways: ROAS & ROMI.

What is ROAS?

Return on Advertising Spend is the simplest way to measure how much a campaign has earned it for you. It is the revenue you scored for every dollar you spent on your ads. For example, you spent Rs 10,000 for your Twitter ads of your Fountain Pen which generated you’re a revenue of Rs 50,000 through sales.

ROAS – Return on Advertising Spend = 50,000/10,000 = 5

According to ROAS, you have netted 5 times your marketing investment i.e. for every one dollar on your ad spend you have netted 5 dollars.

Simple math, but that is what makes ROAS, a tad banal approach to calculate the returns. ROAS only takes your ad spend into your accounts and conveniently neglects all the other costs that are incurred to make the ads: creatives and other resources. ROAS looks good on paper but it only gives a contrived picture of your returns. It can boost up your return figures while in reality, the picture may not be the same.

What is ROMI?

Return on Marketing Investment as the name suggests taking the entire marketing spend of the campaign to calculate the returns on your marketing efforts. Taking a similar example of Fountain Pens; the investment in ROMI takes amount spent of each and every process that went into creating and executing the ad campaign: creatives, ad agency fees, discount offers and then cost of ads. For example, assume that all the expenses amount to 25,000 then

ROMI – Return on Marketing Investment = 50,000/25000 = 2

So according to ROMI, for every one dollar of marketing investment, you have netted 2 dollars, a better and accurate picture isn’t it? Sometimes ROMI is calculated by taking the cost of goods sold into the account giving an even better picture of your marketing efforts on your total profit.

ROAS vs ROMI: Which is better?

While ROAS gives the complete credit to the ads ignoring the total costs, ROMI takes everything into account to give you a better picture to measure the effectiveness of your marketing campaigns. ROAS gives a bloated picture of your returns that could misdirect you over time without giving a reality check. Measuring is all about analysing the data carefully and ROMI is better equipped to help you adequately measure the effectiveness of your campaign.

In addition to offering one of ‘Best PPC Services in Hyderabad’, at Samskriti Business Solutions we help all our clients understand the return of investment on all our ad campaigns to give them a better understanding of the returns on their marketing budget, that way we make right recommendations that help their reach their marketing goals. If you are looking for ‘Best Online Marketing Agency in Hyderabad’ to help you with your end-to-end marketing services.

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