In the Forbes’ FORBESWOMAN column, an article titled Understanding The New ROI Of Marketing states:
“No longer does ROI stand only for return on investment. Today, ROI also stands for return on impression, which encompasses two primary values — a hard metric and a soft metric. Together, those two values are far more powerful for measuring marketing performance than the single dollar value provided by return on investment metrics. Traditional ROI analysis is just the tip of the iceberg. The really interesting part of the story is what happens beneath the surface of the water. The hard metrics related to return on investment barely touch the surface.”
If you do click over to the article, skip reading the article itself, and go straight to the comments. There you will find the voices of rational, sane, and intelligent people.
Bob London writes:
“Sorry but in my opinion this smacks of a desperate attempt to cover up marketing’s tenuous or fictional link to real business metrics.”
My Twitter buddy Jeff Marsico (@jeffmarsico) writes:
“I don’t agree with many of the metrics mentioned because they are too soft. It feeds the notion that somehow marketing folks have their head in the clouds.”
Bob and Jeff are nice, polite guys who know how to disagree with someone in a civil manner.
Sadly, I lack that skill.
My take: The Forbes article is a shameful display of stupidity. And it has nothing to do with women. Why was this sad excuse for an article published in the FORBESWOMAN column?
Talking about “traditional ROI analysis” is like talking about the “traditional definition of left and right.” It’s senseless. ROI is ROI. There is only one way to calculate it: Revenue minus costs divided by costs. The only consideration that’s left to “redefinition” is the timeframe in which those revenues and costs are calculated.
I’m not saying, however, that marketers shouldn’t define new metrics if they add value to our understanding and measurement of marketing activities.
Marketers (and perhaps Forbes columnists) should realize that there are three types of metrics: 1) Input; 2) Output; and 3) Impact.
Input metrics capture how much of something you put in the investment. It could be things like hours per week, dollars spent per customer, raw materials used by item.
Output metrics capture what you get out from that input. Units produced per week, page hits per day, etc. Measures like those proposed in the Forbes article — like Return on Impression — are output metrics. In and of themselves, they have no financial return.
Impact metrics are those with financial return. They capture the amount or increase in sales per some unit of measurement, or they capture the reduction in cost of doing something per some unit of measurement.
Input and output metrics do not replace impact metrics. The problem we have with marketing measurement is that it’s hard to quantitatively tie input and output metrics to impact metrics like ROI.
Smart marketers understand that there is a return on investment chain. You put things in, you get things out, and there is an impact — or maybe not, and possibly it takes a combination of the things that come out to achieve an impact.
The Forbes article clearly demonstrates one other sad fact about today’s business world. Once-top-quality publications like Forbes must be so hard up for content that they’ll publish anything.