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Ryerson University MKT 100 Metrics 8 – Return on Marketing Investment (ROMI)-questios with verified answers

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Metrics 8 – Return on Marketing Investment (ROMI) 1. A new clothing store is considering a direct mail campaign, offering a $10 discount for purchases over $50 before taxes on their first visit. T... he cost of the direct mail campaign is estimated at $25,000, and would likely increase revenue by $130,000 to a total revenue of $540,000. The store’s contribution margin is 35%. What is the ROMI of the campaign? a. 474% b. 656% c. 100% d. 82% i. ROMI = (130,000 x 0.35 – 25,000)/25,000 = 0.82 0.82 x 100 = 82% e. 540% 2. If for every $1 in sales, Acme Corporation has $0.85 in variable costs, then a marketing campaign that costs $25,000 would need to generate incremental revenues of ________ to generate a 100% ROMI. a. $333,333 i. 100% = (X x 0.15 – 25,000)/25,000 100% = 0.15x – 25,000/25,000 25,000 = 0.15x – 25,000 50,000 = 0.15x x = 333,333 b. $25,000 c. $58,824 d. $250,000 e. $2,500,000 3. The purpose of ROMI is to measure the rate at which spending on marketing contributes to profits a. True b. False 4. Marketing funds are typically funds that are: a. Risked on customer communications campaigns b. Invested in plants and inventories c. Both a and b d. Neither a or b 5. The VP of Marketing for Acme Corporation is using ROMI to evaluate spending $20,000 on advertising to generate an estimated $100,000 in sales. For every $1 in sales, Acme has $0.85 in variable costs. Based on this information, the VP should approve the campaign a. True b. False 6. Every year CTC corporation has an end of year sale to clear out its warehouses prior to the annual inventory, with a goal of maximizing sales revenue. CTC is evaluating several campaign options for advertising its year-end scale. CTC Corporation has an average contribution margin of 40%. As the Director of Marketing, which option would you recommend? a. A television and radio campaign with a ROMI of 120% b. A direct mail campaign that costs $50,000 with incremental revenues of $100,000 c. Don’t adver [Show More]

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