For over three years, I have sat back and witnessed the resurgence of a concept that seemed to be largely ignored or only found in dusty marketing books: Return on Investment.

I am referring to the buzz (or is hype a better word?) around social media ROI. What I find interesting is that marketing management is requiring social media ROI to qualify its worth before implementing it. Smart marketers know that it is impossible to determine ROI (a financial calculation) without having net profit, sales and investment numbers, which are not available without actually having done something. Could it be that demanding social media ROI is a stall tactic?

The next logical question then is if there is such a keen interest in social media ROI, why isn’t management requiring the same for all marketing, communications and branding? We should have those numbers readily available, right? (By the way, cost per lead is not the same as ROI.)

Why Isn’t ROI the Norm?

Two simple answers: Human nature and technology.

ROI requires due diligence, experience, performance, financial understanding and leadership. When we think about ROI, there are often positives and negatives on both sides of the equation (literally). ROI puts a spotlight on the good and bad; successful and unsuccessful, positive and negative. You cannot measure one and not the other, as my friend Steve Lubetkin and I discussed recently over lunch.

It is only natural that we would want praise for the positive and spare criticism for the negative. It takes a strong and confident leader to make planning for ROI as natural as breathing and—more importantly—to be able to embrace setbacks and risk.

When it comes to technology, the issue is closing the loop between marketing, sales and profit. Most companies utilize CRM systems for sales relationships, not marketing relationships and typically not profit calculations.  When marketing relationship data is captured, it is often very siloed. CRM systems like SalesForce.com allow for campaign management tied to sales, but then there is the challenge of knowing exactly which marketing effort triggered a purchase; what efforts lead to that purchase and how all campaign tactics should all be weighted.

The good news is that for most digital marketing (especially in B2C), it is easy to determine a direct cause and effect—if it’s a simple campaign with a “buy” call to action. Then ROI can be determine as long as the investment has been accounted for correctly (staff time counts as cost!) and profit is understood.

The next level of complexity brings us back to human nature and political silos. Who owns the CRM system (or any technology) and the data? The company, right? If only it were that easy. I can think of at least four departments that struggle over the ownership rights for both (IT, Customer Service, Marketing and Communications).

The Future of ROI

David Meerman Scott believes that ROI measurement leads to failure and that leads and press clips are the wrong measurement, at least for online marketing. How then is a marketer to balance the ROI of online and offline marketing, which is often the case with integrated marketing? Is it possible?

If I had to make a prediction, it would be that ROI will be no further along in the next 5 years. As I said, it takes strong leadership to embrace ROI for every marketing and communications dollar spent.

I am a big fan of ROI and marketers on top of their game typically are too. However, organizations have a long way to go culturally and technologically and that impacts marketers.

What do you think? Is ROI a craze that will eventually fade away or will it become the norm? What has been your experience? What have you done to encourage (or not) ROI? What other issues are there around ROI?

Addendum (added 2/23):

I should have included the financial formula for ROI, it would make for an even better conversation and/or debate.

ROI = Net Profit/Sales x Sales/Investment

If you can’t provide all of these numbers, then you can’t provide an ROI. It’s that simple.

When it comes to social media, Return on Engagement or Return on Influence are not ROI calculations. If you want to valuate something, it’s brand equity.

A friend suggested that I plant a stake in the ground on this one. So, I will do just that. I believe the ROI craze won’t last because most organizations, agencies and marketers won’t have all three necessary & accurate points of data (Net Profit, Sales and Investment) required to calculate ROI. Some due to human nature, but a lot due to lack of proper technology (CRM, etc.). This will all lead to frustration and the net result will be not providing ROI.

If you work for an agency or consultancy, your challenge will be even greater because of your limited access to sales figures and net profit. Without those numbers you cannot prove the ROI of hiring your firm.

Like I said, I am a firm believer in providing ROI. That’s why I always make friends with sales, IT and finance.

Addendum (Added 2/25):

Based on Ben Kunz’s post, I wanted to add even further clarification to the ROI formula, because there seems to be some confusion (i.e. sales canceling each other out in the equation).

It is important to understand that the “sales” portions of the equation do not cancel each other out. It is required to have two separate calculations that are multiplied for a final percentage. Why? Because the first calculation is to determine the rate of profit on sales and the second calculation is to determine the rate of capital turnover.

The rate of profit on sales is influenced by things such as sales volume, price, product, marcom efforts, etc. Capital turnover only takes into consideration sales volume and assets managed. (This is basic accounting… for a CFO.)

So…further to my argument.

[Image Source: Internet.com]

This weekend I was reading an article in the Fall Harvard Business Review OnPoint magazine (How to Get Your Message Across edition) called “Five Ways to Sharpen Your Communication Skills” by John Baldoni. The article was interesting, but what was more interesting was the comment they selected to share in the Reader Comment section after the article.

John shares these five tips:

1. Know the fundamentals (Understand the written and spoken word.)
2. Think clearly about what you will say (Don’t use PowerPoint as short-hand for thinking)
3. Prepare for meetings (Take the time to think about what to say before you say it.)
4. Engage in discussion (Debate. Hear all viewpoints. Don’t engage in group think.)
5. Listen to others (Discussion is meaningless if no one is listening. “Measure what you treasure.”)

Sounds like everything we learned in kindergarten, right? Still many marketing, public relations and communications pros struggle with these basic elements when it comes to communicating with customers, stakeholders and other employees.

The comment, from Gretchen Anthony, is indicative of this very situation businesses are challenged with:

“One of my favorite quotes on the subject of communication is attributed to George Bernard Shaw, ‘The problem with communication… is the illusion that it has been accomplished.’

To Baldoni’s final point about the need to measure and demonstrate effective communication, we as leaders in our organizations miss this point time and again. How do we know if we’ve accomplished our intended communication goals (and realistically, are we even setting communication goals)?

Where formal measures are lacking, the gut-level measure of trust kicks in. A team, organization, business unit or organization leader who appears to have the trust of their team is most likely a leader who demonstrates a commitment to effective communication. Look to the trusted leaders within an organization and you’ll often see demonstrated the communication skills that work within that organization.”

I’d like to focus on the measurement part of the article and comment. As smart communications pros, we can and absolutely should measure if our message is being communicated properly, but more importantly we should measure if it is being understood.

Five Quick Steps to Make Sure Your Message is Being Understood

1. Analyze Current Data (Collected data about market segments, stakeholders, employees, etc.)
2. Benchmark Current Levels of Message Understanding
3. Develop a Plan that includes an Outtake Objective (For the message you’d like to be understood)
4. Implement the Plan (Be sure it includes measurement. Note: This slide deck is for social media measurement, but the principles can be used for traditional communications as well.)
5. Test to Make Sure The Outtake Objective Was Achieved (or Not)

If this seems too simple, then I’ve done my job here. The point is we tend to overly complicate what is a basic process that works. Where it does get complicated, of course, is when people come into the equation. Corporate politics always have a tricky way of rearing their ugly head, don’t they?

Some additional challenges include not understanding customers enough to know if they fall into the “I’ve tuned you out” category or the “I like what you have to say, it’s relevant to me” category. This is where step one is crucial.

There is also often a communication failure internally. Communicators and management fail to honestly try to understand how employees feel about their position within the organization. Sure, employees are given options to receive internal communications, but are you sure it’s what they need to hear? Are they comfortable and secure enough to tell you the truth?

Is there a communication gap between organizations and the stakeholders that can help spread our messages to others? Benchmarking can help you to understand if there is and what the plan needs to include to close the gap.

What would you offer when it comes to understanding if messaging is being understood? What has worked for your organization? What examples (successes and failures!) would you share?

[Image Source]

After discussing the inauthentic nature of PR in my last post, I hope you know that I do respect and enjoy being part of the PR profession (well, except those PR areas that are broken) and truly believe that most PR folks are engaging in PR in a way that is effective. That said, I still believe that ghostwriting from PR pros (or profs) isn’t necessary or authentic (I am not sure that there’s much that can convince me…but I’ll keep an open mind, I promise).

I thought it might be a useful conversation to discussion how PR 2.0 will keep you SO busy providing strategic services/counsel for your clients or employer you won’t need to worry about ghost blogging and tweeting as a source of income or a way to show value for one’s job. And I know for a lot of PR agencies and pros that might not truly understand the nature (dare I say, culture) of social media, those are areas of concern. I get it, I really do. 

While this might not be as interesting as a debate, perhaps it will prove to be more useful. 

Today’s typical and traditional PR person does a lot of the following tasks: 

• Builds relationships with third-party resources (usually the media, sometimes bloggers)
• Maintains existing relationships
• Does research
• Listens/Analyzes (usually online/print pickups)
• Writes plans
• Provides counsel
• Creates targeted messages
• Conveys timely news with constituents (but typically media and maybe bloggers)
• Builds a brand’s reputation
• Maintains a brand’s image
• Deploys crisis communications
• Clips or tracks pickups or mentions
• Provides measurement of campaigns
• Handles some marketing communications (including collateral, website content if a marketer isn’t part of the team)

 With PR 2.0 you can add the following to your skills, deliverables and job description:

• Monitors brand in real-time
• Listens/Analyzes online conversations or mentions in real-time
• Responds promptly
• Conducts primary research in real-time
• Engages in two-way conversations with ALL constituents (in-house PR folks)
• Participates in social networking in a value-add way (in-house PR folks)
• Develops new online skills (blogging, wikis, RSS, etc.)
• Understand the importance of building relationships with all constituents (media, bloggers, employees, investors, fans, friends, followers, detractors, etc.)
• Responsible for Search Engine Optimization
• Identifies & engages with influencers and brand evangelists (in-house PR folks)
• Manages communities of constituents (in-house PR folks)
• Integrates new technologies into PR plans
• Shares industry information, not just key messages
• Builds communities
• Engages evangelists to help create word of mouth
• Understands that engaging in PR 2.0 will help at time of crisis
• Stays up-to-date on trends
• Trains management, co-workers and/or clients constantly 

I don’t know about you, but to me that looks like a pretty busy job to me! All without having to ghostwrite or tweet (sorry, I couldn’t resist).

I cannot take complete credit for these lists. While I have been engaged in PR for a long time, some people just say things more succinctly than I do…and I like to give the credit they deserve. So, please, seriously, if you haven’t read PR 2.0 by Deirdre Breakenridge, add it to your reading list. She makes the transition to PR 2.0 crystal clear, easy-to-swallow, and provides a lot of proof points (i.e. some of the list information is from her book). John Bell at Ogilvy is another source of great information when it comes to the PR pro of the future (be sure to read John’s post when you get a chance). He’s the guy behind this post’s image and some of the items on the PR 2.0 list. 

I am sure that I am leaving things off of both lists, so please be sure to add where necessary if this is too simplified.

Thoughts? Opinions? Objections?

[Image: John Bell]

There’s been a lot of buzz around measuring the ROI of social media here and other places and it seems to come up a lot during the #pr20chats (PR 2.0 chats on Twitter). Sometimes measurement is a deadly sin (lack thereof) and sometimes it’s seen as a holy grail (can’t get there). Whichever it is, it’s not limited to social media…measuring ROI is also a huge issue for marketers and PR folks too.

Measuring marketing, PR and social media can be relatively simple if you have a plan. And the plan is probably the hardest part, especially getting consensus (management and co-workers), being able to implement it and-most importantly-being agile enough to change on a dime when an element of the plan isn’t working.

I’ll let you in on a little secret, I didn’t learn how to write objectives (the part of the plan that makes it measurable) in college or on the job. Nope! In fact, I learned how to write measureable objectives from the PRSA (Public Relations Society of America) when I took their weekend APR (Accreditation in Public Relations) course about 8-9 years ago. Because understanding how to write a plan with measureable objectives is a large part of achieving the APR, it was also a large part of the weekend course. Since then, I have used what I learned for marketing and PR campaign plans throughout the years and it’s really been helpful to show management if campaigns have been successful (or not) and how I’ve been a contributing member of the marketing team.

I’ve heard a lot of people say that there isn’t standardization when it comes to measurement. I’d say what I am about to share is as standard as it gets… And if you haven’t already picked up a copy of Katie Paine’s ‘Measuring Public Relationships,’ you better rush on over to Amazon.

Some of this you might know, some maybe not. In any case, feel free to share your best practices.

Writing a Plan: The Basic Elements

A basic plan should have:

• A goal (One. If you find yourself writing “and” in your goal, you’ll probably need two plans)
• Measurable objectives (as many as needed)
• Strategies (every objective gets its own strategies)
• Tactics (every strategy gets its own tactics)
• A way to measure

A plan could essentially look like this:

• Goal
• Objective 1.1
• Strategy 1.1
• Tactic 1.1
• Strategy 1.2
• Tactic 1.2
• Objective 2.1
• Strategy 2.1
• Tactic 2.1
• Strategy 2.2
• Tactic2.2

[This basic plan assumes you know your or your client know their challenge, audience, budget, etc.]

Basic example:

Goal: I want to lose weight.

Objective: I want to lose 10 pounds by July 15th

Strategy 1.1: I will go to the gym 5 times a week

Tactic: I will use the elliptical machine, weights and the pool at the gym

Strategy 1.2: I will watch what I eat

Tactic: I will write down everything I eat

Measurement: I lost 8 pounds by July 15th (I didn’t achieve my goal)

Knowing the difference between goals and objectives

When I ask marketing/PR folks what’s their measureable objective is I often hear “to generate more sales” or “to get our key message out.” These are not objectives…they are goals. And because goals and objectives are often confused, it leads people thinking that they can’t be measured in a truly impactful way.

Outputs, Outtakes and Outcomes: Three types of objectives

For objectives to be measureable they must include (no exceptions):

1. A specific desire communication or behavioral effect;
2. A designated public (or publics) among whom the effect is to be achieved;
3. The expected level of attainment; and
4. The timeframe in which those attainments
   are to occur.

Basic Example: To increase number of presentation downloads by online public #1 by 20% within 3 months. (Pretty easy, right?)

Once you understand what is required for a measureable objective, then you need to understand what type of objective makes sense: output, outtake or outcome.

• Output: Physical products (i.e. whitepapers, tweets, blog posts, articles, etc.)
• Outtake: What will the publics take away? (i.e. messages, perceptions, understandings)
• Outcome: What quantifiable changes in attitudes, behaviors, or opinions (i.e. did they buy something?)

Here’s the catch:

Outputs are easy and it’s apparent whether or not you did what you said you would in your plan (was that whitepaper written and tweeted out?). Outtakes require bench marketing and monitoring (how do you know where you ended up, if you didn’t know where you started). And Outcomes require heavy lifting. Because, and this is VERY important, Outcome objectives are usually where ROI ties in, and an organization will need to track all efforts and follow them, most likely, through a CRM system, which isn’t always easy to do.

So what’s the point to this post? Well, people are losing patience when it comes to conversations around social media (as well as marketing and PR) not being measureable. Everything is measurable; you just need to make the time to plan for it. And trust me, as I have said in the past, I have never worked for an organization that enforced or required a plan. That said, it doesn’t mean that you shouldn’t have one. A plan is a great way to show, whether you’re client or agency side, your value as a marketing, PR or social media pro. That said, no one ever said it was easy…

What do you think? Too basic? (That was the point.) Not real-world enough? If so, why are we trying to complicate it?

As always, I am interested in your thoughts, experiences and where this is all heading.

I was reading Marketing News (the American Marketing Associations’ magazine) recently, the 5.30.09 issue on Measuring, and I came across an interesting quote in their “Measure Up” article (you need to be a member to access the article) on the return on marketing investment (ROMI): 

“Marketing is in the process of maturing from a communications function to a business function.” (Tom O’Toole, adviser with Diamond Management & Technology Consultants Inc.) 

Say what? 

The first concern I have with this limiting comment is that marketing has never only been a communications function. Let’s not forget that there are 4 P’s in the traditional marketing mix (product, price, place, promotion). Yes, I get that the statement was used to, perhaps, make a valid point that marketing needs to be an “accounting line item for ROI (i.e. business function).” But from a business perspective, all 4 P’s have always been measureable (in one form or another) and those managing these functions can and should be held accountable for their budgets, spending and ROI (if we spent X, what was the return). Is there a communications aspect with all 4 Ps? Sure people always communicate, right? But let’s assume with this particular statement Mr. O’Toole is addressing the “Promotion” aspect of marketing and equating “communications” to things like advertising, direct mail, online, interactive, PR, etc. 

The second is that even if we look at marketing promotions alone, accountability isn’t anything new and any marketing communications manager, VP or CMO that isn’t measuring marketing communications objectives (and campaigns) is doing a complete disservice to the profession and the company (that business function referred to in the comment). That said I get that marketers struggle with planning, measuring ROI and dealing with accountablity. It’s also tough to work within a corporate mindset (client- or agency-side) that if a campaign doesn’t bring in positive ROI (and lots of press or leads) marketers might face retribution instead of redirection. (BTW, we need to change that mindset.) I also understand that a lot of marketing management skips the important step of planning at all. 

From a measurement and communications perspective, marketing has many aspects that need to be considered, understood and―more importantly―bridged by tearing down marketing silos so that marketers work together AND have experience across the mix. For example, often product managers & product marketers determine the product/service and pricing long before marcom folks are tapped into for promotion. And business development folks determine the distribution (place) for the product. And it’s the marketing researchers that help the product managers & product marketers (and sometimes the marcom folks) to determine the product/service or if there’s even a market for it in the first place. I could go on with lots of combinations, but you get my point. It’s marketing management’s job to ask the basic questions like “did that supply chain partner help to reduce costs, increase sales and justify the marketing communications costs of selecting them as a business partner?” or “did the marketing research we conducted help the product marketers prove that there was a market for our new product and was that research built into the price of the product?” 

I am sure by now you are thinking “Beth, so what does all of this have to do with social media?!” Well, I have noticed a trend that people are stating, thinking or promoting that social media will replace all the corporate (and agency) ills of marketing and that just isn’t the case. 

I wanted to demonstrated that marketing is complex and isn’t just about communications (I hope I accomplished that in a simple manner…otherwise you’d be here all day reading a textbook or 10). As well, many marketing functions reside outside of the marketing communications department. And yet, they all need to work together, like well oiled gears. So while I do think social media (the tools and the concept) can help enhance all of the 4 Ps, it definitely won’t replace them. Saying that is equivalent to saying social media will replace accounting or HR. 

My question is this… if you think that social media will replace marketing, share with us how you think it will replace all the four Ps and how you will measure the return.

[Image: iStock]