How to maximise the return on your marketing & sales investment (ROMSI)!
Do you still agree with John Wanamaker? Many years ago, American businessman John Wanamaker was quoted saying that “half of the money he spent on marketing and advertising was wasted; he just didn’t know which half.” Almost a century passed by and amazingly we still struggle with measuring the return on marketing and sales investments (ROMSI).
ACE ROMSI 2014 video
Research shows companies could significantly improve the return on their M&S spending
Companies spend on average between 10–15% of their revenues on marketing and sales (M&S), and this varies depending on the industry, market context and the company’s life cycle. One key finding of our research is that although most firms monitor some of their key M&S activities, very few actually take a comprehensive approach to maximise the return from their M&S budgets.
We know from experience it’s not easy, but we believe it’s worth it. After all, we’re talking about at least 5–7.5% of revenue, assuming that you agree with Wanamaker’s conclusion that half of the M&S budget is wasted. In this report, we will show you how to approach the issue and help you to not only save money, but also increase your market impact with a similar or even a reduced M&S spend. This goes for both B2B and B2C companies – the only difference may be the amount of the total M&S budget, hence the potential nominal saving.
Our findings reveal that the overall perception of ROMSI is that you can only calculate it when you know exactly how much you have spent (total cost) per activity. Basically, what is the total return associated with this – and only this – activity. This widespread, traditional way of accounting and business thinking, however, is totally ineffective when it comes to calculating and managing the ROMSI.
A different perspective and way of thinking is needed
And this is what we hope to illustrate in the following chapters of this report. What we present here, is not a magic tool, it’s more of a journey – a process to help you to improve dramatically. This is why we have focused this report on a ‘ROMSI Development Model’, which will help you to understand how you can increase your M&S proficiency and impact, depending on your company’s starting point, situation and ambition. Think of the ROMSI Development Model as a map for the journey that your company should take in order to capture more value out of your M&S investment.
The ROMSI Development Model
As this report demonstrates, there are in fact, many ways you could extract more value out of your M&S spend. Although the ROMSI Development Model has six built-in elements, you could just start at the beginning by better monitoring total costs and the impact of your budget and strategic goals. Then, depending on your ambition, you can go even further, and end up building complex econometric models that will help you to maximise your overall M&S budget. How far you proceed along the model is totally up to you. You don’t have to reach the final level to see improvements in your ROMSI.
You will reap dividends just by following the first one or two steps, especially if you are starting at a lower level, as in the case of most of the companies that we interviewed. We know it’s not an easy journey, otherwise you would have already undertaken it. But it’s one certainly worth pursuing, because of the money involved, and the increasing competition and velocity embedded in most markets. As one CMO we interviewed, put it: “It’s up to you whether you want to continue with a ‘guess, trial-and-error’ approach or with a different process and spirit in order to gain more insight and speed.”
Have a nice journey!