There may not be a CEO or entrepreneur on the planet who doesn't smile just a little bit when they hear the phrase ROI. In a world that is fueled by obvious returns in periods to short to make meaningful progress (thank you stock market), the idea that measurability exists provides piece of mind to so many of those responsible for the vision, strategy and execution of their respective organizations.
For many things that our businesses do, measurable ROI is simple. If I buy one more machine and put it into production I can generate X% more products, which will generate Y% more profit. The decision then comes down to a simple question of cash flow. Is the potential return worth the short-term financial risk? This type of ROI can also be applied to other facets of the business such as software automation or expansion of the sales force. However, measuring ROI is not always so simple. In fact, in some areas of the business it can be downright hard.
In marketing, the role (unbeknown to many) is to create customers. Essentially spending X amount of dollars to create Y number of new customers; a simple equation perhaps, but the math to determine the success has long been evasive or maybe even impossible.
Before Internet marketing ruled the roost, the primary measurement of marketing success was how many people "Viewed" your advertisements. From broad scope to narrow focus, the idea was to put your business in front of as many of the potentially correct clientele as possible and more or less hope for a response.
With advertiser feedback and the evolution of 1:1 direct marketing the science became a little bit better, but without specific user action such as the filling out of a survey or input of a campaign code it was still next to impossible to directly correlate the creation of a new or returning customer with a specific campaign.
To some extent the marketing spend was somewhat of a pseudo science that kept entrepreneurs and their CFO's awake at night. Just what was the return of a back page ad in the New York Times?
With the evolution of digital marketing and social media the ability to measure has taken a substantial leap as every campaign can be tracked, keyword spends can be seen and conversions can be associated with dollar value returns. In short, it is possible to set up every piece of content, tweet or keyword buy with a means to determine its effectiveness answering the question; did someone buy something because of this campaign.
In many ways such progress is an epic improvement to the way it was done before. Now the customer needs to do nothing but just "Surf" for us to get the appropriate data to determine the success of a marketing campaign. For some this may be a moment for celebration, but for others the new and more readily available information merely creates more questions, more unknowns and more uncertainty.
As campaigns themselves become more measurable and the results that ensue become more clearly attributable to ROI, the original question of marketing as a means of creating a customer ends up hanging in the balance. Just because our keyword led someone to a landing page, which led him or her to click on our link and take a specific action, is that the reason they bought something?
The most cut and dry response may be yes, but really the answer isn't that clear. Does that workflow from click to buy measure in any way the role of content that the ultimate customer may have consumed? Does it say for sure whom in the customers community may have influenced their decision to buy? Is it really safe to say that the purchasers' affinity toward your brand is legitimized by the sequence of events they went through just prior to making the purchase?
Of course the answer may vary based on the nature of a transaction with the specific brand, but I think the attempt to directly correlate the purchase with the campaign strictly to place a measurable ROI on an activity is an obtuse oversight on the part of those trying to do so. This is because marketing has two very unique stages that need to be measured in totality to fully understand ROI and unfortunately only one part is clearly measurable while the other is not.
The measurable part being the ROI on a campaign, the second being the creation of the aware consumer, the passionate brand advocates and the community that drives earned response to the campaigns seeking measurement. What did building those relationships cost? Can it be measured? Can it be attributed? Better yet, should they be?
Where the science of marketing ROI unravels is perhaps where marketing's greatest application of effort is needed; creating the relationships that fuel a purchase. Otherwise all of those measured campaigns are going to be nothing more than a beautiful automobile without the gas and oil required to run it.
Measured return isn't something that can or should be ignored. It is important to every business to have those tracking results or improvement would become elusive for every facet of a business, but in the world that we call marketing, ROI needs to be seen for what it is and what it isn't and complete measurement still (and may always) lack a certain amount of potential as return on relationship is an idea with legs, but unfortunately not a formula.
In the future, as sentiment measurement gains traction and big data correlations continue to provide more clarity to how things that aren't apparent connect, there will continue to be more and more advanced ways to measure the ROI of the entire marketing mix. However, for now there is still perhaps as much art as there is science when attempting to draw any final conclusions.
What may be the most important take away from all of this is that the desire to connect dots that don't connect needs to be avoided at all costs when trying to measure the ROI of certain marketing practices.
For instance, the value of a follow, a like or (gulp) an impression; sure you can build an equation that will give you an answer but don't be upset when I pass judgment on you for making ridiculous correlations.
The desire to put a stake in the ground with a flag that says "Marketing ROI" will probably continue to radiate like heat in the Saharan desert, but just remember the mirages that you see when you reach your most desperate point are most likely not real, which sounds an awful lot like Marketing ROI?