Return on marketing investment (ROMI) is a model for measuring the effectiveness of marketing campaigns. The aim of this model is to maximize returns on investment in either marketing or a better alternative. It also is a key strategy for brand creation and development.

Marketing returns are divided into two types: short-term returns and long-term returns. According to this model, short-term returns are relatively easy to calculate, but long-term returns are more intangible. This means that short- and long-term returns require different calculations and take into account different marketing and socioeconomic factors.

A short-term return on marketing investment looks to test the value of a single marketing campaign or the value of multiple campaigns for a single product or service. At its most basic level, this could be a leafleting campaign for a new type of mail-order detergent, for example. The cost of the marketing campaign and its directly related sales would be known in this example.

The formula for calculating return on marketing investment is gross profit minus investment, divided by investment. If a leafleting campaign that cost $250 US Dollars (USD) generated $1,200 USD in sales of detergent that cost $900 USD to produce, there would be a gross profit of $300 USD. The $300 USD gross profit minus the $250 USD cost of the campaign equals $50 USD; divided by $250 USD, this creates a return on marketing investment of 0.2, or 20 percent. Basically, it means that every $10 USD spent on the advertising campaign created an additional $2 USD in net profit. If the campaign had generated only $600 USD in sales, resulting in $200 USD in gross profit, the ROMI would be calculated at minus-20 percent, meaning that the company actually lost money because it cost more for the leafleting campaign than it created in gross profit.

The most difficult element of this equation is calculating additional profit and the cost of investment. In the example used above, the brand awareness comes only from leaflets, but most marketing campaigns use a variety of methods, such as posters, television commercials, radio spots, newspaper advertisements and ads on social media websites. Businesses often do not know exactly how much new revenue is generated by a specific method of marketing.

This means that the sales and marketing departments are left to calculate profit and investment. This calculation requires the cost of goods sold (COGS) and the cost of producing the campaign. Marketing requires research, production, labor and placement costs. This becomes more complicated with sophisticated marketing campaigns, multiple products and multiple sales strategies.

A downside of short-term estimations of return on marketing investment is that they do not factor in long-term returns. Long-term returns are more difficult to calculate because they include brand awareness, impulse buying and word-of-mouth advertising. Results from long-term metrics are less reliable because there are many variables involved.