The owner of a small bakery in London, England describes her recent Groupon experience as "without doubt, my worst ever business decision".

I respectfully and earnestly disagree.  But I'll get to that.

Rachel Brown, through Groupon, decided to offer $40 worth of cupcakes for $10.  8,500 people took her up on the offer!  In a very short period of time, she needed to bake over 100,000 cupcakes, forcing her to hire extra staff which resulted in a $20,000 "loss" on the Groupon experience.  She went on to say "we had thousands of orders pouring in that really we hadn't expected to have".  And she described that as a bad thing.

Excuse me?!

That has to be the first time in history that someone complained about thousands of unexpected orders.

Now, I get that for small businesses, an unexpected $20,000 expense can be overwhelming and difficult to accomodate financially.  But I think she's missing the bigger picture.  She just sold 100,000 cupcakes!

Let's remove Groupon from the picture for a moment.  Imagine someone approached her and a month ago and guaranteed her 8,500 new customers for $20,000.  "Where do I sign?" would most certainly have been the response.  But because it all happened so quickly and because she wasn't prepared for it, she is portraying the experience as negative, as is the media.  I also think that because Groupon was involved, the temptation is to lay blame there.  Groupon is tremendously successful (and powerful as a result) which I think makes them a target.  But that's not my main point here.

Mostly, I want Ms. Brown (and other business owners) to consider the other outcomes of this experience:
- 8,500 people now know of a local bakery that sells great cupcakes, sometimes at a discount.
- The bakery has received immeasurable media exposure (which is surely worth $20,000 on its own).
- The word-of-mouth exposure has surely been significant ("You should see the deal I got at Need a Cake...")

Add all that up and you get business value that far exceeds what $20,000 can buy.

That's the point.  If you think of this as an investment in the marketing of the bakery, it's an overwhelming success.

What I really hope is that they somehow captured the contact information of the 8,500 new customers (I really, really hope they captured email addresses).  If so, imagine the potential for future business from an audience that has clearly demonstrated a willingness to purchase baked goods with the right offer.  If not, well, that would be the real failure in all of this. 

YOUR TURN:

I am really interesting in your opinion on this.  Do you agree?  Am I missing something?
   
   

Blasphemy! How could I even suggest such a thing, right?

Hear me out.

I don't have a problem with fiscal responsibility. The problem is the math.

For years, business managers and marketers have been calculating Marketing ROI as a way to justify spending, staffing and other 'investments'. They've been creating metrics to measure such as calls to a dedicated phone number, coupon redemptions, new leads and more. Then, after comparing those metrics to the cost of the corresponding campaigns, they get a tidy ROI calculation that is used to evaluate marketing efforts and justify campaigns going forward. 

Enter social media. The emergence of social media as a mission-critical marketing tactic (and investment) has given ROI heightened importance. And rightly so. Business owners want to be able to justify spending more time and money on a new (supplemental) marketing discipline, marketers are better able to measure 'return' (since most response can at least be observed, in the form of Retweets, Likes, and so on), and managers that don't quite yet see the value or importance of social media for business can at least see that it has a positive ROI. 

So, we agree that the concept of validating effort and investment is worthwhile. My problem is assigning a mathematical calculation to marketing. It can't be measured. I should clarify: it's difficult if not impossible to measure response, let alone attribute that response to a specific, measurable investment. 

Let me use some examples to illustrate my thought process.  

Many marketers measure web traffic (and even online sales) against investment in email development for an email ROI calculation. Seems logical, right? Sure, but maybe some of those browsers / purchasers were more influenced by something like a friend's recommendation, and were merely inspired to buy by the email? That visit / purchase may not be directly attributable to the email alone. How is the investment in word-of-mouth, which happened much earlier, factored into the equation?

Another example: Many marketers measure Twitter Followers against the time invested in Twitter engagement for a Twitter ROI. Logical again. But there is also a correlation between the value of the content being tweeted and the number of Followers. How do you factor the genius of the person writing the tweets into the equation?  

Another example: How do you even measure the return of a billboard campaign?

There are many other examples of ROI calculations that are first of all based on metrics that are hard to measure, and second of all not necessarily directly attributable to the tactic being measured. In legal circles it's comparable to circumstantial evidence.

So what's my solution?

Don't get me wrong, you should continue to care about ROI, but stop trying to calculate it mathematically. Instead think of it this way: "To what extent will this marketing tactic help me reach my objectives?" That's your 'return'. That thought process allows you to assign a grade or rating to the tactics accordingly. For example, if one of your objectives is to better manage your brand reputation, social media helps you achieve that objective to a great extent. Then, assign a measure of 'investment' to that tactic. Keeping with social media as the example, the monetary investment is $0, but the investment of time is considerable. So in this case, the 'return' is great, and the investment is 'considerable'. That's about the best you can do. The challenge then becomes comparing that tactic (social media) against other tactics to determine where you will direct your (presumably limited) resources (time and/or money). Are there tactics that help you achieve your objective(s) to a greater extent, with a less considerable investment of time and/or money? If so, do that first.

All of this is designed to help you understand where you should dedicate resources.  That's the key to marketing management. There are lots of marketing tactics - all of them worthwhile.  But for those businesses that don't have unlimited resources, you need to be choosy. You need to, as best you can, determine which marketing tactics deserve your investment. That's where this new way of thinking comes in. 

Instead of ROI, I call it ETWTAOAITM:  Extent To Which the Tactic Achieves the Objectives Against the Investment in Time and/or Money.  The acronym sucks, I know.  Hopefully the concept helps you make better marketing decisions!

YOUR TURN:

Defend the ROI! Let me know why you still calculate an ROI for your marketing, other than because your boss makes you. 

Facebook just rolled out a fairly significant change to users' home pages today.  

This isn't the first time this has happened, nor will it be the last.  However, this one feels different.  It feels worse.

The primary difference in the redesign is the 'featured stories' emphasis.  The prime real estate of the page is occupied by 'Recent Stories' and stories 'From Earlier Today".  These 'stories' are posts from my friends and the Pages I Like that Facebook deems to be most interesting to me.  Gone... or should I say pushed to the side... is the simple chronological feed of updates.   

In the past I haven't made much of a deal about Facebook redesigns - there's a period of resistance and opposition, but eventually people get used to it and move on.  But in this case things are different.  Facebook has decided that it will decide what's important to me.  

I'm not sure I like that.  

How do they know what's important to me?  And what gives them the right to show me just that?  I'm sure they know a lot about what's important to me based on the Pages I Like, the comments I post, and other clues.  But every once in a while I like to look at random things or read about topics that are new.  

Before this redesign it was quite clear that Facebook was collecting these 'Top Stories' as they were called, but I had the choice to toggle between 'Top Stories' or 'Most Recent', and each was given the same amount of attention.  Now, if I want the most recent, I have to scroll through the small, cramped window that's been dismissed to the corner.

Facebook, I don't agree with the liberties you have taken, nor with the implication that you know what I like.  

I only wish there was something I could do about it.

YOUR TURN:

What do you think?  Am I overreacting?  Will I just get used to the change like every one before this?