### Best Practice Guide

The IPA has produced a best practice guide on effectiveness...

# ROMI calculator

This tool allows you to work out the return on marketing investment (ROMI) for your campaign.

To calculate ROMI, you'll need the following data:

• Cost of campaign (This includes all media and production costs and agency fees)
• Incremental sales (These are the additional sales resulting from the campaign only)
• Retailer margin (This is the percentage of sales revenue taken by the retailer)
• Variable cost per unit (This enables you to calculate the total variable costs for the campaign) or the percentage marginal contribution to profit (This percentage removes the variable cost of the campaign)

If you have these, it should take approximately 4 minutes.

## Cost of the campaign

This includes all media and production costs and agency fees.

Please enter the total cost to the client of the marketing activity you wish to evaluate:

## Incremental sales

These are the additional sales resulting from the campaign only, and can be represented in both value and volume.

What is this?

Compare actual sales with 'base sales'; how much you would have sold if you hadn’t run the marketing activity in question. Incremental sales can be calculated by subtracting base sales from actual sales. To learn more read Chapter 4 of the guide.

## Incremental sales

We calculate that your campaign generated incremental sales worth

## Retailer gross margin

This is the percentage amount of sales revenue taken by the retailer.

What is this?

The percentage amount of sales revenue taken by the retailer. However, for some advertisers this will be zero as they sell direct to the end user.

## Incremental revenue

Your campaign generated incremental revenue for the client to the value of:

Now we need to work out how much of that was profit.

## Calculating the campaign's profit

To calculate the net profit generated from your campaign firstly you need to calculate your contribution margin. This is the proportion of sales revenue remaining once you have deducted the variable costs of the campaign. There are three ways to calculate this.

Please select a formula based on the information you have available:

The second part of the calculation is to subtract the cost of the campaign from the contribution margin to calculate the net profit it generates. But as you have already entered the cost of the campaign and have calculated the contribution margin, we have the numbers we need to calculate ROMI.

## Results

We calculate ROMI for your campaign as:

This means your campaign generated £X net profit for every £Y spent.*

*Note: ROMI calculation is based on the net profit generated after campaign costs are deducted.

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