Calculating Marketing ROI is a waste of time.

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. 

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