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Metrics 8


Department
Marketing
Course Code
MKT 100
Professor
Paul Finlayson

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MKT100 - Metrics Mastery Worksheets
By: Fawad SyedID: 50040 4091 Date: March 29, 2011
Worksheet: Metric 8 Return on Marketing Investment (ROMI)
1) A marketer is evaluating two marketing campaigns. It is estimated that Campaign 1
would generate incremental revenues of $250,000, at an incremental cost of $50,000 and
a contribution margin of 30%. Campaign 2 would generate incremental revenues of
$50,000, at an incremental cost of $20,000 and a contribution margin of 50%. If the
marketer is basing their decision solely on ROMI, which campaign should they go ahead
with?
250000*(.30)-50000/500000
= 50
=50000*.50-20000=25%
2) A clothing retailer is considering investing in a newspaper advertising campaign to
generate more sales. The campaign is expected to cost $3,000 in creative agency fees and
$9,000 in circulation costs, while increasing revenues from $110,000 to $170,000. The
retailer’s contribution margin averages 25%. What would be the return on the marketing
investment of the newspaper campaign?
60000*(.25) 3000/12000 = 25%
3) An alternative option for the clothing retailer (in the previous question) is to invest in a
direct mail campaign targeting previous customersonly a fraction of the reach of the
newspaper campaign . The cost of the direct mail campaign would be $1,000, but would
only result in increasing revenues to $150,000. What is the return on marketing
investment in this case?
150000-110000=40000
40000*.25-1000/1000=900%
4) If the clothing retailer (in the previous questions) decides to execute both the newspaper
and direct mail campaign what would be the combined return on marketing investment.
12000-1000=13000
100000*.25-13000/13000= 92.31%
5)ANS: Direct mail campaign is greater than the newspaper and combined
execution. Execute both as the revenue increase is $100,000 greater than the
$60,000 as a result of the newspaper campaign and the $40,000 as a result of
the direct mail campaign.
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