Question

Topic: Research/Metrics

B2b Return On Marketing Investment Targets

Posted by Anonymous on 8/26/2010 at 8:50 AM ET 250 Points
Looking for target metric for Return on Marketing Investment (ROMI) for B2B Software.
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  • Posted on 8/26/2010 at 4:34 PM Moderator
    How about anything that's profitable? If the profit on incremental sales is greater than the cost, then that should be considered a success. Then you can refine your activities until you get to a point of some arbitrary target -- like greater than the cost of capital, or greater than your current net profit percentage.
  • Posted on 8/27/2010 at 8:47 AM Author
    I'm looking for B2B Software sales target. $1 of investment returns $2, $3, $4?
  • Posted by Jay Hamilton-Roth on 8/27/2010 at 9:03 AM Member
    There isn't a gold standard - it's relative to your offering, your marketing strategy, your budget, your resources, your brand perception, etc.
  • Posted on 8/27/2010 at 9:13 AM Author
    I'm only looking for a general rule of thumb (which it sounds like there may not be). Something along the lines of overall marketing spend should be around 2-3% of revenue. On a tactical level, a program should return 1, 2, 3 dollars of direct profit for every dollar of marketing investment.
  • Posted on 8/27/2010 at 9:25 AM Accepted
    There is no rule of thumb. It depends on your own objectives and a zillion other factors. Marketing spend can range from less than 1% of sales to something in excess of 50% of sales. It all depends.

    I'd say a good place to start is by at least recovering the cost of capital. If you are currently paying, say, 6% to borrow money, then you ought to at least earn 6% on your marketing investment -- $1.06 in incremental profit for every $1.00 spent on marketing activity. And if your variable profit is 20% of sales, then you'll need $5.30 in incremental sales for every dollar spent on marketing activity. (1.06 / 0.20 = 5.30)

    Keep in mind that the 6% cost of capital in this example is an annual rate, so the marketing return should be annual also. If you can run three marketing campaigns a year, each using funds generated from the previous one, you can adjust the numbers accordingly.
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