I’m not nearly enough of a business iconoclast to say Return on Investment isn’t important. Frankly, it’s how we keep the lights on. Unfortunately, ROI can be difficult to measure or just not especially effective as a way of projecting the value of a particular project or strategy in advance. It’s easy to calculate ahead of time how much a new piece of equipment will bring back to the company in value over a period of time, but it’s much more difficult with something like a social media strategy where it can be difficult to put a dollar value on even a successful outcome. That doesn’t mean that ROI doesn’t have a place, far from it, but it does mean that a positive, projectable ROI cannot always be the price of admission for every project.
While ROI sometimes is difficult to pinpoint for things like content marketing or customer retention strategies, you can and should always be able make a strong business case. Is it addressing a specific pain point? Is the business lagging behind competitors in a particular area? Would it increase value or take a workload off a certain project or department? Don’t throw something out just because you can’t put a dollar value on a ROI if you can make a strong business case for it. Too often people hear the idea of not worrying about ROI at the outset of a project and think that it means that there’s no concrete, measurable goals for the project or no way to gauge success, and that simply isn’t and cannot be true. Business value can be measured in ways other than dollars, but anyone proposing or approving a project should be able to clearly articulate what the business stands to gain and how.
And so, enter our good friend Return on Objective
ROO can be a much more effective measure for things like content, where it can be challenging to match the content to a specific number of sales. The key for ROO is that it has to start from a place of having a specific, measurable goal for any given piece of content. What did you want the content to do and how well did it do it? Was your goal to gather an email address in exchange for an ebook download, so that those customers could be contacted by the sales team? Was your goal to increase awareness of a new product line through social media? How are you going to measure whatever your goal is? It’s important to not only define the goal, but to define how you plan to measure it. Too often, we don’t realize that we’ve inadvertently given ourselves a weak, loosely defined goal until it comes time to figure out how to measure it. If you can’t find a way to measure if a goal has been achieved, you need to pin down the specifics of the goal more concretely.
A recent New York Times piece cited the research of Zeynep Ton, which supported the idea that workers who are better paid and better treated actually result in increased total profits for their employers. This is exactly the kind of ROI vs. ROO challenge that some marketing strategies run into, where the inability to assign a positive dollar value to a project causes it to be overlooked despite there being a sensible business case for it. It logically makes sense that if you do things to increase job satisfaction (with better wages and benefits and working conditions, for example), those employees are going to work harder, generally be better to work with, and deliver better customer service, but it can be very difficult to measure something like that ahead of time. The logic is consistent and you can make the business case for it, but before at least a trial period, the numbers are hard to come by. By accepting the idea of a strong business case and the short term ROO (in this case, that better paid workers will be happier and more efficient), companies were able to increase profits as well as increasing employee wages and benefits. The ROI argument ahead of time would have been difficult to make, but that shouldn’t have negated the value of the idea.
A logically consistent business case ahead of time, ROI to measure later
In many cases, even if ROI cannot be used effectively as an initial method of projecting the value of a project or strategy, it can be used to measure the effectiveness after the fact. With something like increasing employee wages and benefits, you should be able to measure the ROI after a sample period to prove your logical business case is true. Measuring profits per employee plus doing a survey for reported employee satisfaction isn’t especially difficult, but you have to try it before you have the data to measure the success. For something like a content strategy, you can use some of your historical data to compare conversion rates and what the ultimate sales value is, in many cases. If you know that, for example, ten percent of the emails sent out in a given campaign are actually clicked through, and what the average purchase total is at the end of that process, you can compare that to an alternative strategy to see what the click through and conversion rates actually are and compare that to the cost. These things are intensely measurable in many cases, but only after you’ve taken the leap of faith to give something at least a trial. Think of it like the scientific method. Make the business case first, if it’s logically consistent then perform an experiment to test it (an initial campaign or pilot test of a strategy), and then measure the results of that test to see if the initial hypothesis (that business case) is true.
It’s critical to have measurable goals for everything you do in business. It’s how you maintain focus, it’s how you keep a team unified around a specific focus, and it’s how you keep all the moving parts of a business going in the same direction. As long as you remember that those goals will not always have a dollar sign attached to them at the beginning, innovation and creativity can coexist with a results oriented mindset. Have an idea you’d like to see implemented that you’re struggling to make a concrete case for? Have an example of a great idea that would never have come to fruition if you had to prove it could make money ahead of time? Share with our community in the comments!