For all that business advances and marketing strategies change and production methods become faster and more high tech, Return on Investment (ROI) is still the name of the game. And really, it has to be! No matter how altruistic and community minded and socially responsible a company may be, the ultimate goal of a business (and not a non-profit or a community organization or a co-op or whatever else) is to make money. Of course the challenge is, as business becomes ever more complex and your resources get spread in more directions, some things aren’t as easy to calculate the value of as a new phone system to increase the speed at which you can take orders or anything that concrete. ROI has to become more flexible, the way we measure it has to adapt to the reality of what we’re really trying to accomplish, and sometimes a clear ROI simply has to be a measure used after the fact and not the price of admission for a new project. So in this brave new world where businesses have to make money, but figuring out what investments are worth it is more complicated, how do we measure ROI?
Know what you’re trying to accomplish
You can’t measure something if you haven’t identified what the thing is in the first place, so the first question has to be “what are we trying to accomplish?” Are you specifically trying to drive sales? If so, of a specific product or service or to a specific market segment? Are you trying to generate leads? From specific markets or specific divisions or employees? Are you trying to build brand awareness? From specific demographics or about particular portions of your offerings? You can’t measure whether something is working until you have a clear and specific idea of what your goal really is. Once you know why you’re doing something, you can start to put together the how and figure out how to know when you’ve done it.
Define specific measurables
Once you know generally speaking what your end goal is, you need to star to whittle it down to a specific, measurable performance. Something like “increase website traffic” isn’t even specific enough, because what if something boosts traffic 2%? That’s not very much, but if it’s the result of something that took a very minimal amount of effort and cost, that may be plenty to generate a return. In contrast, a 10% increase as a result of something that was a resource intensive, time consuming project may not be enough to break even, much less actually show a measurable return. Once you have specific measurables, you can figure out what your break even point on cost for any specific project, marketing campaign, or other effort is and go from there. For example, if you’re working on a social media campaign with a goal of increasing leads, and you know that an average sale is $1000, and generally ten percent of leads become sales, then $100 per lead is your break even point. From there you can figure out, for example, how many ad impressions or how many hours spent crafting social media content it takes to generate one lead, and run your numbers.
Be willing to let those measurables not be about dollars and cents sometimes
I realize I’ve spent a lot of time thus far talking about figuring out how to put dollars and cents to the value of a project, but some things make it very difficult to measure exact return, especially if what you’re trying to accomplish isn’t specifically sales driven. If your goal is something like increasing reported customer satisfaction or speeding up support response time, it may be a challenge to figure out exactly how much value that has, because lots of factors influence customer satisfaction rates and repeat purchase rates and isolating your variable in this situation can sometimes be more work than it’s worth. You still want to be specific about your goals and how you intend to measure them, but sometimes it’s okay to say, for example, that you want to increase reported customer satisfaction by ten percent, set a budget you feel comfortable with for whatever your plan to accomplish that is, and then check back in a reasonable amount of time and see if you’ve met your marks.
Have a realistic sense of how long it may take to generate ROI
Not everything is going to run on the same time table, so it’s important to set your frequency of audits and your ultimate target date specifically for each project with attention paid to what the incubation time for the medium or the set-up time for the new tech is going to be. In marketing, long form content can take a long time to reach the right audience and start showing up regularly on search results, social media traction takes awhile to develop as you cultivate an audience and earn credibility, but a particular advertising campaign can have a much more immediate measure of success. You have to know how long to give something to generate a return before pulling the plug, adjusting course, or ramping up efforts based on your data thus far. It’s also important to not let early data on a long term effort sink motivation or confidence. Personal trainers and doctors tell you not to weigh yourself every single day, because the normal fluctuations can be disheartening if you see yourself gain and lose the same pound over the course of two or three days, and sometimes checking in on your ROI is the same thing. If you’ve decided a project has six months to make significant progress, don’t look at two weeks worth of numbers and let it get you and your team down.
Run customer surveys to back up analytic information
Simply seeing increased sales or a boost in traffic over a specific time period doesn’t always mean that your efforts are working as you planned, especially in a situation where there may be several variables at play. So really, why not go straight to the horse’s mouth, as it were? Click through trackers for email campaigns or PPC or promoted social media update efforts are typically very realistic, but they’re not perfect. If someone reads your email, deletes it or files it away for future reference, and then remembers about it and goes to your website or makes a purchase or does whatever the goal activity was without clicking through the original email, that may not be captured. If someone made a purchase because a competitor is struggling, but not because your efforts to improve customer retention have been successful, just seeing that sales bump may not give you the whole story. Directly asking the question “how did you find out about us?” or “did you take advantage of an email offer from us in the past six months?” or “why did you choose us for this purchase?” can give you secondary data to check what the rest of your data tells you.
What it all really boils down to is an old adage that I’ve heard from at least one of my parents and no fewer than four bosses over the years — “have a plan, work the plan.” If you know what you’re trying to do, and you have a specific plan on how to accomplish it and how to know when you’ve done it, you’ll be successful more often than not. Think of your biggest current goal, and how you would measure your ROI on your efforts to accomplish it, and share with us in the comments. Thanks for reading, as always!