Metrics 8

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Published on 16 May 2011
School
Ryerson University
Department
Marketing
Course
MKT 100
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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Document Summary

Worksheet: metric 8 return on marketing investment (romi: a marketer is evaluating two marketing campaigns. It is estimated that campaign 1 would generate incremental revenues of ,000, at an incremental cost of ,000 and a contribution margin of 30%. ,000, at an incremental cost of ,000 and a contribution margin of 50%. =50000*. 50-20000=25: a clothing retailer is considering investing in a newspaper advertising campaign to generate more sales. The campaign is expected to cost ,000 in creative agency fees and. ,000 in circulation costs, while increasing revenues from ,000 to ,000. 60000*(. 25) 3000/12000 = 25: an alternative option for the clothing retailer (in the previous question) is to invest in a direct mail campaign targeting previous customers only a fraction of the reach of the newspaper campaign . The cost of the direct mail campaign would be ,000, but would only result in increasing revenues to ,000.