Move over ROI. Now it’s ROO.

Making this kind of offer won’t necessarily produce an immediately measurable return. But its impact will ultimately return value many times over.

If you’re tracking financial return on investment (ROI) as the sole benchmark to determine if your marketing programs are working, then you need to know that there are other ways in this new world to go about doing so because otherwise you’re missing a big part of the picture.

You see, as much as we like to talk about ROI being a critical metric for marketing success, there are not many organizations that really calculate this metric — I mean really calculate it.  The reason being that linking ROI to business efforts is just plain difficult, especially as a cumulative total, due to the blurring of cross-channel integration, competitive activity and economic and marketplace factors. The truth is, most CMOs have a general sense for what’s working and what’s not with respect to overall marketing spend and therefore overall ROI is calculated with experience and intuition (not on a spreadsheet).

The thing is, marketing isn’t black and white, and there are a number of marketing objectives don’t link directly to revenue / return.  What if the objective is branding or awareness?  You might expect an indirect impact on sales.  You would also measure the success of the campaign very differently; maybe you just want to see if more people visited the website, or visited the store.

Enter Return on Objectives. Analyzing ROO means that you accept and understand that not all goals are measurable with hard data. Sometimes, marketing efforts simply help a business move in the right direction to meet its long-term objectives. For example, it could take the form of a business that develops a social media plan and creates a library of content on its website blog page, Facebook page, YouTube channel, and so on over the course of a year, all of which will undoubtedly move the company closer to its long-term brand building objectives.

There has been and always will be two schools of thought on the value of hard vs. soft metrics. Solely relying on traditional ROI isn’t enough and there will always be marketers who don’t like the fact that soft metrics play an important role in marketing today, but without considering them, a big piece of the story is missing.  For example, the value of word-of-mouth marketing and an emotional connection to brands can’t necessarily be quantified. But that doesn’t make it any less important.  A CEO, CMO, or CFO who ignores the less tangible importance of engagement and consumer perceptions of brands will limit the potential growth of those brands. In today’s world, that’s a big mistake. The best marketing leaders and teams can marry the two — hard and soft metrics — in order to make the best strategic decisions for the company.

Think of it like this: If short-term financial ROI is the single factor with which marketing activity is measured against, many large successful brands would never advertise. For most business types, only a smaller proportion of marketing communication generates a short-term purchase response, and this is particularly true for well-established mature brands.

Investment in marketing communication for some brands should therefore be seen for often what it really is: reinforcing/strengthening favorable brand perceptions and insuring the brand’s strength and status for the future. It isn’t always a math calculation where the dollars spent have to exceed dollars coming in. So much of building brand value is tied to emotional involvement in a brand, and that’s even harder to quantify than social media conversations and sharing. However, I don’t think anyone would argue that emotional involvement doesn’t add to equity (at least I hope they wouldn’t). Otherwise, a brand like Nike would be just another athletic shoe company. Disregarding those emotions because they can’t be precisely quantified would be a tragic mistake.

As well, what current ROI metrics don’t account for are what I’ll call “lurkers,” the people that are watching and waiting to take action. If we as marketers bail too soon based on the short-term analysis of results, then we miss the boat.  How many of us have at one time or another been a “lurker?” All of us, right?

That said, without a doubt most marketers want to prove that the dollars they have invested have achieved measurable success and cost effectiveness. For me, ROO can be defined as the “Total cost of campaign divided by the number of objectives met.”  To do it right, the key to measuring ROO is that specific objectives need to be created from the outset of a project along with a specific end date. In other words, the marketer must plan for measurement at the same time that the campaign is being developed.

So, instead of evaluating success based on revenues, marketers should take a look at measuring returns based on whether their objectives, from brand awareness to customer relationship-building, are met. Completion of these objectives, rather than dollars earned, will determine the success of a given campaign. As a result, ROO results will come in all shapes and sizes, but will not necessarily be defined in immediate dollars and cents…just like the offer in the photo above probably achieved for Plaza Cleaners.

My point is that ROI numbers don’t tell the entire story and relying on hard metrics alone isn’t enough. The hard and soft data is available to you for you to use it. You can bet your competitors are…or will be doing so soon.

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Rolf Gutknecht is vice president, director of account services for LA ads. To discuss your thoughts with Rolf on this blog or any marketing matters, email via this link, or visit www.LAadsMarketing.com.  You can also connect with Rolf on LinkedIn.

 

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This entry was posted in Advertising, Branding, Direct Response, Marketing, Media, New Business, Online Marketing, Sales & Marketing, Social Media, Strategic Planning, Strategy, Uncategorized and tagged , , , , , , , , , , , , , , , , . Bookmark the permalink.

One Response to Move over ROI. Now it’s ROO.

  1. OK there are many objectives. There is no objective that is worth anything more than its ROI.

    This discussion reminds me about the old 70is and 80is debate about if management by objectives was better than management by walking around or management by sitting in the office landscape or . . .

    My suggestion is to stay with ROI but leave the idea about quarterly results. It is much easier.

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