I’d like to talk about ROI and the principles behind generating a Return on an Investment.
I read somewhere that Tim Cook of Apple recently was quoted saying the following:
“When we work on making our devices accessible by the blind,” he said, “I don’t consider the bloody ROI.”
I love this mentality. I love the approach. I especially love that it caught more than my attention in the business world.
As a consultant, agency, or anyone getting paid to work in marketing or advertising on behalf of a client, ROI is always the buoyant topic that floats to the top.
Clients like to invent questions that end up posing as some version of the following:
- What is our ROI on your services so far?
- When do we expect to at least breakeven?
- When we start making money on these efforts, should we scale it up?
These questions cover the three possible outcomes of entering into marketing operations. The first is the recognition that the monetary input of money spent is greater than the output of money earned. The question itself is suggestive enough of the doubt, but the targeting of a specific service, such as social media for example, makes it an unwinnable proposition.
The second question is passive-aggressive in that it’s an understanding of present failure with a shove into the direction of urgency. By implying that the client simply wants to “make their money back,” they are seemingly undermining your efforts and moving the bar lower to make you work harder. Little do they know that this bar is a mirage and that our work intensity doesn’t always equate to financial results.
Finally, the last question is an assumption from the client. It’s the dangling of the carrot even though we’re already winning the race. It’s “we figured it out” and now we can put this on autopilot. It’s the “we don’t need you anymore” threat. By asking if they should scale, they’re trapping you into a “Black Box” scenario. But smart marketers know that there is no such thing as a box that prints money incrementally. Just because you’re profitable at one rate, does not mean that rate stays the same when you increase the investment into it.
Let’s quickly talk about when the discussion of ROI is even warranted. For many marketers, what we do is a long-term top-of-mind strategy that can’t possibly be accurately measured over time. It’s branding. It’s customer service. It’s the cost of doing business.
So how can we gauge the success of what we do? The answer is always “it depends.”
For starters, advertising is almost always measurable. Well, at least digital advertising is these days. Advertising platforms on the web have such detailed tracking and analytics services that you can’t help but know whether you’re making money on your ad spend.
It’s the other marketing practices that color all sales funnels a shade of gray. For example, when you employ a team to create content, write blog posts, respond to comments, or even update your website, you shouldn’t expect to measure a return on your investments.
Creating content gives potential customers the impression that you’re still in business and that you have a vibrant agile company culture.
ROI = Unmeasurable
Writing blog posts is a short-term virality or a long-term SEO play. It’s a form of creating content, but it’s also a source for brand discovery. Does it make customers purchase items? No, of course not. But it will inevitably remind readers that your brand exists.
ROI = Unmeasurable
Responding to comments on either a blog post or a social media profile should be compartmentalized into the “support” category. While it is also marketing in the short and long-term, everything is technically marketing since everything that anyone does can be tied back to the company. The fact of the matter is that transparency and stellar customer service lead to sales. Albeit not directly, but in the grand scheme of things, massively indirectly.
ROI = Unmeasurable
What is a corporate website worth? Companies spend thousands of dollars to not only put one up, but they pour an equal amount into it monthly in order to maintain it. Why? How do you measure that that is a worthwhile investment? Again, you can’t REALLY. But everyone knows that having a great website increases the likelihood of someone wanting to do business with you. This, however, can be bucketed back into business as usual. It’s customer support. It’s branding. It’s unquantifiable.
ROI = Unmeasurable
I’d hate to finish this post referencing the obvious, but for those that are familiar with Gary Vaynerchuk, I’ll leave you with an anecdote that he frequently revisits when anyone mutters the term “ROI.”
He immediately asks them a simple question – “What’s the ROI of your mother?”
It’s acceptable to not be able to answer that. How can you? At the very least, though, you should recognize the concept. You and I had different mothers that led to different childhoods and subsequently different life paths. My mother ultimately could have turned me into a caring and benevolent successful millionaire family man. All the while the mother of a homeless individual I know could be the source of his anger, bad decisions, and overall misfortune. But either way, a mother is a core part of our being as humans. She plays a pivotal role in our personal (company) culture. We can’t possibly attribute all of our successes or failures to her, but we can understand that parenting plays a huge role in our overall human development.
Gary has even taken this discussion further by using another similar example.
He states that if he was gifted a piano at the age of 5, his parents may have never seen a return on that investment. However, Billy Joel’s parents, when they purchased one for their young son William Joel, changed his life forever. For Billy Joel, a piano is priceless. He can create tremendous amounts of value with it. But for Gary, it’s worthless. It sits there and wastes away.
This, my friends, is the perfect argument for the aggravating ROI conversation we will all have with clients time and time again. If you set your expectations properly and understand the purpose behind everything you do in your business and marketing, you won’t try to measure the ROI so frantically. Instead, you’ll work toward improving your clients’ (and your own) company culture, customer service, and brand message in order to elevate your ROI in every single thing you do.