CMO.com recently published this article by our head of strategy, Harvey Cossell, looking at the limitations of ROI as a modern-day metric of effectiveness. They've been kind enough to let us reproduce it below.
Return on investment has long been the go-to measurement for marketing success. It’s short, simple and easily understood by CEOs: ‘for every pound we spent on media, we made X pounds/dollars in sales.’
That was fine when we lived in a world of interruptive, above-the-line advertising across a limited number of channels, where campaigns had a clear beginning, middle and end. Brands could run econometrics on the total activity and each contributing channel to produce an ROI figure based on attribution towards net sales data. Maybe it wasn’t always clear exactly how the TV ads and Outdoor media led to the sales uplift, but the numbers were there.
But net sales data can take weeks – or even months – to feed through before you can even begin the analysis. And in the world of digital, that’s a dozen lifetimes and paid media is not always involved. Add to that the fact that econometrics can be an expensive and time consuming undertaking, and ROI as a modern-day metric of effectiveness looks rather limiting.
As we all know, today’s comms landscape is fractured, with channels changing and proliferating daily. We’re moving from purely interruptive forms of marketing towards a culturally-led approach, where people actively seek out brand content themselves. And that content has many forms: everything from editorial and campaign content that spark consideration through engagement, to conversion content that is designed to openly and directly sell.
Do brands really think all this can be measured with one simple ROI metric? One that isn’t even available until weeks after the event? Can that chaos and complexity of multiple channels and multiple approaches be pinned down in a single number? We’re not dealing with a hermetically-sealed ecosystem here and there is the contribution of earned media to consider as well.
A Pragmatic And Actionable Approach
As an industry, we need to realise that one size of measurement doesn’t fit all. We need to take a more pragmatic and actionable approach to how we measure ‘value’ across the digital realm. An approach that matches the pace of consumer response and the speed at which culture changes.
When content sits across channels that include social media and can cover consideration, choice validation and actual sales conversion, surely we need to be far more nuanced in how it’s measured. Not to mention that one of the major opportunities with digital as a marketing discipline is that measurement should be available in real-time, or close to it.
That doesn’t mean moving away from quantitative measures, as a lot of CMOs have dashboards from their agencies that provide a wealth of metrics to employ. But equally that doesn’t mean using overly complex and granular figures around brand affinity and consideration that are too abstract: we’ve all experienced brand tracking data that do little to explain their relationship to tangible effectiveness.
Look at Facebook for one example: brands can easily track the monetary value that comes from click-throughs from Facebook to your e-commerce site. And if the content isn’t designed to generate sales directly, metrics such as dwell time can still demonstrate how much value they’re bringing, whilst geo-location data and pixels can allegedly ‘attribute’ that communication directly to a sale. ROI can’t categorically know for certain how many of the sales eventually came from people looking at a piece of campaign creative on Instagram and thinking a week later when they’re in the store, “yup, I remember that one. I’m going to try that product”.
This is about educating both CMOs and their agencies to move beyond ROI as their default metric. The first step, as always, is to better understand the consumer buying cycle specific to the category in question, so there is a clear picture of the issues and challenges the brand faces and therefore what their comms objectives are: is it about awareness, consideration, engagement, sales conversions or a blend of all?
Then they can set objectives and use measurements within the right parameters to understand if their marketing is adding value in the right places. If SEO and Google search rankings are the most important, measure how the campaign is affecting those. If you want to see your brand equity increase, focus the metrics in a way that tangibly reflect this.
Value Comes In Many Shapes And Sizes
The value of content is as much a philosophical question as it is a practical one. ROI as a metric is limited as it suggests all communication will directly contribute to sales return when, in fact, value comes in different shapes and sizes, asking if different types of content are behaving as well they were originally intended.
That means measurement is much more about nuance and requires a more sophisticated understanding of the marketing strategy at play. The principle here is clear. Ask if your content can deliver value and then determine what that value might be. If you choose your metrics accordingly, and test and learn, you’ll end up with a quantification of value that makes a lot more sense.