ROMI Deep-Dive – An Education Provider’s Perspective
In this article, we’ll look at explaining the difference between ROMI and conversion rates, and why it’s crucial to look at ROMI when understanding how to invest in online marketing channels for student recruitment.
What is ROMI?
When we talk about ROMI, we’re talking about Return on Marketing Investment.
ROMI is used in online marketing to measure the effectiveness of marketing campaigns.
ROMI in the Education Industry
We often hear people talking about ROI (or Return on Investment), but what we really need to focus on as marketers is ROMI.
ROI can be described as the total amount earned once expenses have been subtracted eg. Net Profit ÷ Total Costs (or investment). ROI is not specific to marketing costs.
When we talk about ROMI, we’re talking about measuring the effectiveness of marketing activities.
That is, any revenue generated specifically from online marketing investment, divided by the spend required to run your marketing campaigns.
In education marketing, it is the money invested in various paid online marketing channels (such as Google Ads or Facebook Ads) to attract student enquiries.
A positive ROMI will usually justify marketing spend, but we’ll go into this in a bit more detail later.
Overall ROMI from different marketing channels is influenced by:
While there is a wealth of information available on how to create a successful, multi-channel marketing strategy, it is just as important to measure the success of your paid marketing investment.
How is ROMI Different to Conversion Rates?
Marketers are very focused on conversion rates, and at Candlefox we often fixate on them too!
A high conversion rate will mean that a high number of student enquiries are converting into enrolled students, which will usually give you a high return.
Using conversion rates as a measure of success, education providers will often minimise marketing spend on low converting courses or channels, and maximise spend on higher converting courses or marketing channels.
However, this simple approach is not always the right way to analyse cost efficiencies.
Conversion rates, in isolation, neglect the impact of varying course prices and any variance in the Cost Per Lead (CPL) for acquiring student leads via marketing channels.
If we take a look at the example below, we can see the results of a marketing campaign for two different courses, which both converted leads into enrolled students at a conversion rate of 10%.
|Cost Of Leads
More money was invested to generate 100 student leads for Course B (a higher CPL) than Course A, yet the price students pay to enrol in this course is much higher ($5,000 compared with $1,000).
Therefore, the overall return (or ROMI) from Course B is significantly higher.
This means that for every dollar spent on attracting leads for Course A, it returns $3.80 in revenue, while Course B returns $10.00.
This makes Course B the far better performer.
Based on the CPL and conversion rates alone, the effectiveness of a marketing campaign can not be assessed in full.
ROMI becomes very helpful when looking at bigger datasets with multiple variables.
In the example above, the number of student leads and conversion rates are equal for each course. In the real world, these are likely to be very different, as is the CPL across varying courses.
Seasonality will most likely impact the CPL that you pay across channels such as Google and Facebook, which is why it’s just as important to assess performance on a regular basis.
Let’s take a look at a more complex example with a range of courses, course prices and conversion rates.
In the below example, we have courses with prices ranging from High to Low.
Each course is offered at a different price, the CPL varies based on the price range, and the conversion rate for each course is also different.
With so many variables, it’s no longer as simple as looking at conversion rates alone to understand performance.
|Cost Of Leads
A low conversion rate isn't always bad
Course 5 could be identified as a poor performer with a conversion rate of just 2.9%. However, as the course is offered at a high price ($9,224) and a relatively low cost-per-lead of $60, it has a ROMI of 4.5, which is actually quite good!
A high conversion rate isn't always good
Course 1, the highest converting course at 9.3%, actually has the lowest ROMI of 2.5 because of its low price point ($1,000).
With this in mind, we will often see short courses with a relatively low price point (around $1,000), converting >15% of all student enquiries generated through online marketing activities. Given the CPL for these courses is usually quite low as well, they generally produce a good ROMI.
However, a university level degree that only enrols 8% of all student enquiries will most likely produce a good ROMI as well – generally speaking, these type of courses are offered at a much higher price point.
We would still need to look at the CPL to acquire student enquiries for these courses individually, which will most likely be higher for a university level course, and account for this in our calculation – which is what we are doing when looking at ROMI!
‘Revenue’ and ‘Spend’ are both comprised of two factors:
‘Enrolments’ x ‘Course Price’
‘Cost Per Lead (CPL)’ x ‘Number of Leads’
The combination of conversion rate, the course price and CPL will determine how you measure the efficacy of your marketing channels, and which of your courses are performing.
You can also visit our ROMI Calculator to see this in action!
A Basic ROMI Guide
0 – 3
3 – 4.5
4.5 – 6
6 – 8 +
ROMI is a Long-Term Metric
It’s also important to understand that ROMI is something that needs to be measured over time, and that it takes a while to reach the full potential ROMI of a marketing channel.
You will need to consider your sales cycle (average time from student enquiry to enrolment) when calculating your ROMI.
Based on the providers that we work with here at Candlefox, it takes approximately three months to achieve the full potential return from Candlefox as a marketing channel.
Seasonality and course type (such as cost or course length) can also influence the length of your sales cycle, which means that calculating ROMI immediately after activating an online marketing channel will not paint an accurate picture.
What ROMI Should I Be Seeing?
ROMI is not a static metric, and it will vary greatly from provider to provider.
When determining course price (which impacts ROMI), the cost of delivering the course is a key element to consider, which will vary based on the type of qualification, delivery method and subject area.
There are additional factors, such as course completion rates, loan defaults and other business overheads that will also impact the costs required to deliver a course.
However, when calculating ROMI and setting a baseline target / KPIs, you’re only looking at the return on marketing investment, and not net profit.
The ideal target range for ROMI will sit somewhere between 3 and 8.
What this means, is that for every $1 spent on online marketing, you should be seeing a $3 + return.
With this in mind, and once you can build in the costs involved in course delivery, lead acquisition costs and a desired profit margin into your course prices, a target ROMI can be set.
Once you’re able to determine your baseline ROMI, you might find that some courses perform better than others, and other courses produce a better ROMI across other marketing channels.
Market trends and seasonality might also dictate which courses deliver a higher ROMI some months over others, which is why it’s important to review ROMI and your marketing mix regularly.
Low converting courses can still produce an excellent ROMI, and lower ROMI courses can be key revenue drivers, as long as you are recouping costs over time with these courses.
The Importance of a Marketing Plan
As we’ve covered before, a Marketing Plan is simply a plan of attack on how you can reach your objectives.
Student recruitment is challenging, and the student journey can encompass many different touch points.
Building out your brand and online presence, creating a content marketing strategy and understanding how to optimise the student journey post-enquiry – these are all important elements in a successful student acquisition strategy
A Marketing Plan will always harness unpaid as well as paid initiatives to attract prospective students.
The great thing about online marketing spend is that you can easily measure the impact of your investment, particularly if your goals are enrolling a certain number of students, or driving enrolments for a certain course.
Justifying online marketing spend and measuring the success of any paid marketing initiatives that you undertake to attract student enquiries over time – this is where ROMI is crucial.
Using a marketing channel such as the Candlefox Marketplace can help you drive a high number of student enquiries and maximise your ROMI, as well as helping you meet your student enrolment goals.
Contact us today for more information on course marketing and lead generation.