Where’s the ROI in lazy thinking?

One of the most overstated and misunderstood concepts in business today must be ROI - return on investment. Ever since the arrival of digital marketing with the promise of highly specific metrics capable of breaking down a campaign into detailed numbers of clicks, conversions, dollar value and revenue versus cost, lazy marketing has been ruled by the instant analytics displayed on a sales spreadsheet. Every proposal becomes prefaced with “What is the potential ROI?” Every campaign is judged by the immediate numbers with little consideration of context, long term effects or related benefits to the business.

The obsession with ROI means that such figures are now being demanded from things that have no business being analysed in this way.

Separating technology from strategy

When I discuss social media with business owners, I am often asked about the ROI. “Yes, but how does Twitter create sales?” I’m asked. “What does a blog do to increase clicks and conversions?” they challenge. Leaving aside the fact that some businesses have used Twitter and blogs to achieve exactly those outcomes - Dell selling over $3 million worth of computers on Twitter for example - ROI needs to be thought of differently when considering social media.

As Erik Qualman cleverly points out on his Socialnomics blog;

A big question out there these days is: What is the ROI of Social Media? Or the ever popular how do I measure the ROI of social media? Often when I get this question it’s appropriate for me to retort: “What’s the ROI of your phone?”

Exactly. Social media is a communication technology, just like the phone on your desk and the email on your screen. You don’t look for an ROI in these technologies - but you do look for an ROI in the strategies you use them for! You may use your email for a specific email marketing promotion and track the results from that, monitoring click throughs, open rates and conversions. But if it fails to make an impact, you wouldn’t say that email technology is a waste of time in business and begin removing Outlook from your staff computers. You’d criticise that specific email strategy and look to the design, copy or promotional concept behind the campaign for for possible improvements and changes.

Ditto the phone. Your handset isn’t to blame if you spend more time talking to the wife than chasing leads and has nothing to do with the marketing scripts your team uses to close a sale. If your sales are down one month, you’re not going to rip out the phone lines due to terrible ROI. You’ll rewrite the scripts, train the staff, analyse customer responses and make concrete strategic conclusions.

So why do people insist on arguing about the ROI of Twitter or Facebook? The only time to apply the ROI question is in response to a particular campaign or strategy you have run in these spaces.

But sales are only one part of ROI. The most obvious and the most discussed, but only one part of it, all the same.

Saving money is an ROI too!

A business has multiple lines on the balance sheet, not just sales revenue versus marketing costs. How much is spent running customer service? How much is spent on technical support? Brand awareness? Internal staff communications? Interstate meetings? Processing and packing orders? PR and publicity? Any number of business activities come with a cost. Therefore any number of strategies can have a monetary value to the business that has no relation to sales conversions at all.

Instead, a business may find powerful financial arguments for some of these new technologies in other cost-laden parts of their business. Some companies, including Telstra and Optus, have begun using social networks to create faster, more responsive customer service and technical support offerings for their customers. If trivial or simple enquiries can be dealt with in 140 characters in a tweet, there is most likely a cost saving in the resources that would otherwise have been put to the enquiry if it had come through the traditional channels. A tweet is less work and quicker than dealing with a phone call. In fact, this is exactly why some companies are adopting tactics like this to speed up customer support, provide greater efficiency and reduce costs in this department.

There are other cost savings quite often overlooked. Websites that invite user-generated content are not usually doing it to boost sales, but to boost content and page views of their site - for free. Users providing content for no payment to your site, helping to increase ranking in search engines and attract other visitors, can have a positive influence on the bottom line in other less direct ways. A higher search engine ranking may mean more traffic may mean more conversions may mean more money. But instead
of paying for the manpower and resources to produce that extra content, UGC makes those production costs negligible. Now that can lead to a powerful ROI.

Moonfruit’s massive ROI performance

Even more powerful is creating a mechanism for UGC off-site, as Moonfruit discovered in July last year. Creating a Twitter competition with a few Macbook Pros up for grabs, Moonfruit encouraged Twitter users to tag their tweets with #moonfruit to go into a draw. All those tweets tagged with the company brand meant that #moonfruit was one of the biggest trending topics on Twitter, even during the Iran uprisings. This led others to investigate what this Moonfruit business was about. People blogged about it. Newspapers wrote articles about it. All those links led back to Moonfruit, who eventually ended up with a 300% increase in website traffic and a 20% bump in sales! Plus, most importantly, Moonfruit is now number one in Google for their key phrase, dramatically increasing site traffic long after the campaign had finished.

But none of that Moonfruit activity can be tracked in the way most businesses seem to in this digital age. No one can pull out a spreadsheet that says that a particular link generated these specific sales which calculates this ROI. All they can say is that, for a $15K investment in prizes, brand awareness was massively increased (a marketing cost saving), the resultant PR in newspapers such as The Wall Street Journal and websites like the BBC netted them hundreds of thousands of dollars worth of free PR and all the extra
links boosted their Search engine rankings, a massive saving on SEO. Through all these indirect symptoms, traffic and sales understandably rose.

Many of those extra sales may have never come across the Twitter campaign or even read about it in any of the press reports. They may have simply discovered the more exposed presence in Google. Analytics are never going to draw that direct correlation between Twitter and an unrelated click in Google, even though common sense says one is a result of the other. The benefits Moonfruit received were external byproducts of a cause-and-effect, invisible to traditional click versus conversion metrics.

Many businesses are now realising the myriad ways of extracting genuine financial returns out of social media - often by avoiding the simplistic ROI approach still celebrated by so many. Erik Qualman’s latest video demonstrates a few of these examples.

Freeing up the analysis of ROI from simple click-to-conversion transactions to identifying beneficial long term company trends can show that campaigns or strategies that may look unsuccessful on one spreadsheet make huge financial sense on another. It comes down to asking the right questions and applying the right expectations.

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