Briefly discuss how marketers measure return on marketing investment. Explain why this figure may not be sufficient to judge marketing's effectiveness

Question

What will be an ideal response?

Answer 1

Ans: Return on marketing investment (ROMI) is the net return from a marketing investment divided by the costs of the marketing investment at a given risk level. In other words, ROMI is a measure of the profits generated by investments in a marketing activity. There are several objectives to using ROMI exclusively to assess the effectiveness of marketing activities. First, in a company's accounting statements, marketing expenses typically appear as costs, rather than investments. Second, ROMI requires profit to be divided by expenses, rather than subtracting expenses from profit. Third, calculating ROMI requires that marketers know what would have happened if the marketing expenditures had not taken place. Fourth, firms use different methods for calculating ROMI, making it difficult to compare the measures. Fifth, ROMI tends to lead managers to short-term decisions. Finally, ROMI does not emphasize a firm's sustainability commitment.