An Education Provider’s Guide to ROMI (Return on Marketing Investment)
This is your ultimate guide to ROMI.
We’ll unpack what ROMI is and why it matters in education marketing and student recruitment.
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What is ROMI?
At Candlefox, we often hear marketers talk about ROI – a financial metric used to measure the probability of gaining a return from an investment. However, ROI only measures the total value of business investments rather than marketing investments alone.
Return on Marketing Investment (otherwise known as ROMI) is a better measure of how a marketing campaign, channel, or partner performs.
It’s calculated by dividing any revenue generated from marketing by the total amount spent.
When talking about education marketing, ROMI measures the money invested in various paid marketing channels, such as display advertising and lead generation partners, to generate student enquiries.
How is ROMI calculated?
ROMI is revenue over spend. For example, if you spend $1,000 to generate $4,000 revenue, your ROMI will equal 4.0.
There are four components to ROMI in education marketing:
Timing and competitiveness determine your CPL. Seasonality will impact how much you spend, particularly across channels such as Google and Facebook.
Number of leads
The volume of leads you receive depends on your marketing activities’ performance – the creatives and key messages you use will influence whether students submit an enquiry.
The type and price of your course can impact your revenue. When determining the course price, the cost of creating and delivering the course is important – consider the type of qualification or course, delivery method, course completion rates, loan defaults and other business overheads.
Volume of enrolments
How successful your enrolment team is at converting student prospects is critical. A solid post-enquiry and lead management strategywill set your course advisors up for success.
Introducing the Candlefox ROMI Calculator
For providers who have a large scope of courses or use various marketing channels, our ROMI calculator can help you easily determine what’s performing and what’s not.
Head over to our ROMI calculator, enter your data and calculate your ROMI.
What ROMI should you aim for?
ROMI is never a static metric and will vary significantly from provider to provider. And while there is no ‘right’ ROMI ratio, we’ve provided an essential guide for education providers:
A Basic ROMI Guide
0 – 3
3 – 4.5
4.5 – 6
ROMI needs to be measured over time. It’s a performance metric that takes time to reach its full potential.
You need to ensure you provide adequate time for your marketing channel or campaign to ‘mature’.
Before you review your ROMI, you need to consider your sales cycle – the average time from student enquiry to enrolment. Your sales cycle will determine how often you calculate your ROMI.
ROMI is a long-term metric
We suggest our lead generation providers aim for a ROMI of at least 3. This means that for every $1 spent on marketing, you should be seeing $3 or more return.
As you become accustomed to ROMI, you’ll find that some courses naturally perform better than others. Additionally, market trends and seasonality will also play a significant role in determining ROMI.
We recommend you review your marketing plan and results regularly (more on this below).
Based on the education providers we work with, it takes approximately three months to achieve the full potential return from the Candlefox Marketplace.
We suggest our partners measure their ROMI in 90 day cycles.
ROMI vs conversion rate – which one matters most?
Most marketers will tell you that conversion rate is pretty straightforward – the higher the conversion rate, the higher the return. But this is not the case with education marketing.
Education providers that only measure success using conversion rates will often minimise marketing spend on lower converting courses or channels, and maximise spend on higher converting courses and channels.
This principle doesn’t always yield the highest return.
Course prices play a significant role in determining the revenue, and the value of your investments. It’s important you report on ROMI as well as conversion rates.
A ROMI case study
From this case study, we can identify that:
In this example, we see the marketing results for two different courses. Both have enrolled the same number of students at a conversion rate of 10%.
By analysing this data, we can confidently say’ Course 2’ is the better performer, attracting a stronger ROMI despite having a higher CPL.
A more complex ROMI case study
In our first example, the volume of student leads and conversion rates were equal for each course. However, this is unlikely to be the case in the real world.
ROMI becomes particularly helpful when looking at bigger datasets with multiple variables. In the example below, we unpack more complex data with a range of leads and enrolments, course prices and conversion rates.
From the above example, we can see that ‘Course 4’ has the best marketing performance – receiving a ROMI rating of 8.8. This is because it had a greater ratio of revenue earned compared to total expenses.
Interestingly, ‘Course 1’, which had the highest lead to enrolment conversion rate, was one of the lowest performing courses.
These examples confirm that conversion rates and CPL do not always generate the highest return.
With so many variables, marketers must look beyond conversion rates and CPL. Education providers using ROMI are able to critically assess their marketing performance.
ROMI is all about the relationship between revenue and expenses. It’s important that you seek opportunities to increase your revenue, either through achieving better enrolment rates or increasing your course prices, whilst decreasing your expenses.
Here are a few additional tips: