The ROI of Everything

Joey Sargent
Joellyn Sargent President, Claravon Consulting Group

Posted on November 14th 2014

The ROI of Everything

Frequently clients ask me to help them develop ROI models and marketing metrics that serve as a foundation for effective decision-making. I’m glad they do, because understanding value returned from marketing investments is essential to a successful marketing effort, and it’s not as easy as it seems.

A sound approach to measuring marketing ROI sits at heart of an agile marketing strategy. There’s no way to make the right choices about where to invest and where to cut back if you don’t know how various activities contribute to your overall results.

Maybe you can measure “everything,” but why would you?

It’s a common misconception that basic ROI calculations can apply to individual marketing activities. To get an accurate assessment of an activity’s contribution to marketing results, you need to start with objectives and measure against those first.

I call this “Return on Objectives,” and it’s the primary checkpoint to determine whether your marketing is working. Whatever the activity, you should have established objectives at the outset. Maybe that was to “generate more leads” or “get the word out about us in the business community.” (One of these is inherently more measurable than the other.)

With the ability to track clicks, leads and purchases online, digital advertising is very easy to measure in terms of ROI. Blogging, community outreach, social media and brand awareness are not. Neither is PR or analyst relations. But you can tell if these things are working if you trace your results back to clear objectives, like “meet with analysts and the top three firms in our industry.”

Find the Right Formula

Some executives struggle with the idea of not measuring marketing ROI at the lowest possible level. But what’s the ROI of a pencil? Or a meeting? Or the plants that decorate the office?

While all of these things contribute to the success of your business (well, we could argue about the plants, but I like them), they don’t generate sales on their own. In this case, applying a basic ROI model of Revenue vs. Expense doesn’t give you any actionable information and could easily lead you to make poor decisions that undermine your long-term success.

Suppose you look at an event like an educational seminar for prospects and say, “How many customers did we get from that?” If the answer is none and you decide that educational seminars don’t work, you could be making a huge mistake.

What you missed is the fact that 40% of your customers attended an educational seminar at some point in the 6 months before making a purchase. A raw ROI model won’t tell you that, but it’s vital information.

It shows that your educational seminars are a key contributing factors in winning new business. They build the relationship, create trust, and prepare buyers to buy. With that knowledge, would you kill the program?

Add the Lens of Time

Many things a marketer does are investments, not expenses. Work done to generate media awareness, build relationships with influencers or create an appealing brand is valuable, but hard to measure without looking at results over time.

What’s the impact on your business a week after launching a program? Or a year later? It’s probably vastly different.

To get a more accurate picture of impact and ROI, I encourage my clients to do two things:

1) Establish a timeline for results. If you’re investing in a program that may take a while to bear fruit, decide on check points. Track revenue growth 3, 6, and 9 months after launching, and then make your decisions. Some campaigns or programs take a while to catch on, and killing them too soon would be wasteful.

2) Apply a programmatic approach. We all know you can win a battle and still lose the war, and the same is true in marketing. A single win is not necessarily an indicator of success. Measure the results of integrated programs rather than individual tactics. This eliminates the misleading anomalies in results and lets you see the true impact of your efforts.

Adopt these two approaches to more effectively measure marketing ROI, and you’ll be much better off.

Joey Sargent

Joellyn Sargent

President, Claravon Consulting Group

Joellyn ‘Joey’ Sargent, president of Claravon Consulting, creates unstoppable momentum for business growth. She helps executives develop the strategic clarity and vision they need to create powerful customer relationships and energize revenues. Author of Beyond the Launch: The Practical Guide to Building a Business that Thrives, Joey speaks around the world and is frequntly quoted in the media on strategy, leadership and branding.

Read Joey's blog at JoeySargent.com.

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Comments

pm2014
Posted on November 26th 2014 at 3:22AM

Hello Joellyn

Would you measure ROI when your just starting out with the more unmeasurable side of marketing? Or wait untill you have build a base? Im worried that the first weeks might look very dissapointing even though long term it could develop into something worthwile.