ROI: The More Cocky the Claim, the More Dubious

How many times have you heard breezy assertions from marketers about how their strategies “drive real ROI,” and then watched them roll out as the “evidence” email open rates, website conversions and reader surveys? Too many? Me too.

Usually marketers report such tactical results because that’s all they’ve got, and their clients settle for them because they need to show something to their CMO! But if those metrics are all marketers have, it’s because they didn’t create a substantive analysis of the net financial gain achieved by the program.

Why? Usually for one or both of the following reasons:

1.  The program wasn’t designed properly to identify and track legitimate financial metrics.
2.  The business objectives of the program weren’t sufficiently financial in the first place—and neither the client nor the marketer had the sophistication (or courage) to acknowledge that.

In these days of tight budgets, virtually every prospect we talk to asks how we measure ROI. That’s totally fair: They want assurance that their marketing dollars will render value to the business. Simple as that. It’s our job as marketers to tell the truth about the various forms of measurement, of which ROI is just one.

One of the most important truths we have to tell is about the rigor of achieving ROI—and the required investment for both them and us. For example, if a marketing program undertakes an improvement in customer retention, there’s some nitty-gritty work to be done to measure that. Click-throughs won’t cut it. You need to know what the current retention rate is; the dollar value of a retained client for a predetermined period of time; how you identify, measure and monitor a test group; how long a program should run before its anticipated effect is measurable; and what the required change in retention is (and the resultant dollar value of the change) before the program is deemed a success.

You don’t get those kinds of true, hardcore ROI metrics easily. They require collaboration and transparency between the client and the marketer. They frequently require several departments within the client organization to gather and share data with one another and with the marketer. They require careful program design from the outset and the buy-in of all stakeholders on that design.

Without those key ingredients, everyone gets frustrated and nervous, and suddenly the definition of ROI starts evolving.

Let’s keep it real: ROI is a real concept that requires true collaboration between marketer and client. There’s nothing breezy about it.

Chief Operations Officer Jim Hill focuses on innovative content marketing solutions for McMurry's clients and also oversees operations of McMurry’s New York City-based video production firm, Spark Productions.