how to Evaluate Advertising Effectiveness?

Discover how to evaluate advertising effectiveness, how to calculate the ROI, the difference between ROI vs ROMI and, ROAS to make sure you get the best demonstrates your ad campaign’s effectiveness.

how to Evaluate Advertising Effectiveness?

Spending on an ad campaign is just part of the equation. Calculating the return is another. The equation often gets confusing since you may get tangled between ROI vs ROMI and, ROAS for understanding which one best demonstrates your ad campaign’s effectiveness.

To save you from all this trouble, we’ve put together this guide that explains what return on investment (ROI), return on marketing investment (ROMI), and return on ad spend (ROAS) are and how effective each is.

You’ll learn the following:

1) What is the Difference between ROI, ROMI, and ROAS?

2) How to Calculate Each of these Metrics?

3) How to Choose between ROI, ROMI, and ROAS When Measuring the Success of Your Advertising Campaigns?

What is the Difference Between ROI, ROMI, and ROAS?

When looking at ROI vs ROMI, there’s little difference between the two. In fact, when marketers say ROI, they are often referring to ROMI.

The chief difference lies in terminology.

Where ROI or return on investment is a general term, ROMI or return on marketing investment is marketing specific. Both show the profitability or waste of a sum of money that you put into your ad campaign.

One more thing: you can take a two-way approach to calculating the return of marketing investment (ROMI).

1) ROMI without factoring in marketing expenditure

2) ROMI without considering the cost of goods

How to Calculate ROMI, ROAS, and ROI?

Let’s now walk you through the formulas for calculating each of these metrics:

How to calculate ROI?

Take the sales growth from the ad campaign and subtract it from the marketing costs. Then divide by the marketing cost.

In short:

Sales growth – Marketing cost/Marketing cost

How to calculate ROAS?

Take the total conversion value and divide it by your advertising costs.

Or:

Total conversion value/advertising costs

How to calculate ROMI?

Take the marketing income and subtract cost of goods and marketing expenditure from it. Then divide the total with marketing expenditures. Finally, multiply it by 100 to get a percentage value.

Put simply:

Marketing income – cost of goods – marketing expenditure/marketing expenditure * 100

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