What’s Your ROI IQ?

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You’ve just presented a brilliant new advertising/marketing campaign when, from the tar pits, rises this: the dinosaur who, drawing from some Triassic-aged bank of analytics knowledge, says, “Show me a good ROI or I’ll show you the door”? You cannot take the threat lightly, because the dinosaur in these cases is almost invariably powerful enough to rip your efforts to shreds and search elsewhere for the tasty ROI it believes exists.

To manage the beast, you must have an evolved sense of what ROI really is, how to capture it and how to present it successfully from new perspectives.

First, let’s look at the term, itself. BusinessDictionary.com defines Return On Investment—in short—as, “The earning power of assets measured as the ratio of the net income (profit less depreciation) to the average capital employed (or equity capital) in a company or project.” Can marketers say they are investing in a company or project? A television or Internet campaign is much less tangible. Some would even argue that marketing is more an expense than an investment and, as such, belongs in the advertiser’s P&L.

Nobody’s saying ROI isn’t an important metric. The trick is understanding the many relevant interpretations of the term.

Modern wisdom, embodied in this case by a pundit from Forbes Magazine, looks at ROI from different angles and finds value in each. She asks us to consider ROI in the digital realm as Return on Impressions (self-explanatory), or in the social media space as Return on Opportunity (as in opportunities that arise when a branding effort takes on a life of its own), or Return on Engagement which comes from analyzing the interaction of consumers with your brand. There’s also Return on Objectives, a calculation of potential once the objective of a long-term effort is reached. All of these versions of ROI examined together can give a clearer picture of value versus expenditure.

Even if you don’t buy in to her rationale, you have to agree simple, one-dimensional ROI isn’t enough on which to base an integrated analytics picture. One must factor in the strategic intent of all marketing investments a company makes. Your representative’s visit to a client is supported by your print campaign that earns credibility by word of mouth endorsements which prompt action at point of purchase and so on. This gets into return on incremental investing and a look at not how much consumers bought, but at how much MORE they bought, because of your marketing spectrum.

In another twist of the term, ROI can stand for Return on Influence. This regards social media marketing and the ripple effect that occurs when like-minded people pass the word about your brand. Immediate dollars returned can’t be quantified. Analytics must instead focus on lead generation, customer acquisition and moving the customer along the purchase life cycle—and the registers ringing as a result.

This single blog entry can’t provide the content you need for an in-depth understanding of how to use ROI as a metric or how to counter those who believe it is the ONLY metric. It can (this blogger hopes) inspire you to look at ROI differently and go on to educate yourself. A Google search with parameters as simple as “New ROI” will start you down the right path.

As every intellectually astute article should begin and end with Einstein, I quote: “Whoever undertakes to set himself up as a judge of Truth and Knowledge is shipwrecked by the laughter of the gods.” This is certainly applicable to those stuck in old thinking about ROI—and perhaps to certain bloggers who think they know everything.

–From the braintrust @ Creative Dimensions