What’s the ROI of Everything?

Lately, there’s been a growing insistence that social media (and marketing in general) be measured solely by the end result: sales.

Despite plenty of lucid arguments to the contrary, many smart (and opinionated) people believe that “community building,” “brand management,” “increased awareness” and other intangible benefits of marketing are useless, or at least that they’re incidental byproducts of marketing’s real purpose: sales, sales, sales.  If something can’t be measured in ROI, it’s a waste of time, and since so much of what we now call “social media” is ethereal, the validity of the entire field must be called into question.

And I agree.

But where I think people lose track of their own argument is at the root.  Because marketing is sales.  And so is shipping.  And so is packaging.  And so is customer service.  And so is employee retention.  And so is public relations.  And so is dress code, color scheme, the ecological impact of your parking lot and the flower arrangement in your lobby.

Every part of your business impacts sales. That’s because sales is the end goal behind every decision your business makes, from the market you target to the name on the door.  And if we’re going to wail in the streets about all the ways people are missing the point about marketing, then I need to see some more hard numbers of my own.

For example:

  • Are your conversion rates affected by the screen brightness of the buyer’s monitor?
  • Which muzak was playing in the elevator immediately prior to peak sale hours?
  • How do sales rise and fall during each employee’s lunch break?
  • Which verb tense generates the most e-blast click-throughs?
  • Do stores lit by CFLs outsell the ones lit by incandescents?
  • Does your shopping cart’s border thickness matter?
  • Is your delivery van’s tire pressure affecting the integrity of the packages, resulting in the possibility of lost business due to customer disappointment with the surface scuffs on the product’s overwrap?

The variables are infinite.  And they ALL affect sales.  Just because marketing is an easily-measurable target, and one that’s popular to publicly dissect, that doesn’t mean it’s the only aspect that should come into question.

HR, tech support, cleaning ladies, spouses — I’m looking at you.

What’s the ROI on everything?

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  • http://twitter.com/newetiquette Kim Z

    42?

  • http://www.sexcpotatoes.com/blog/ SexCpotatoes

    The return investment on everything is precisely what you put into it.

    What these companies don’t understand is that goodwill can directly translate into dollars. Look at Apple, they usually treat their customers very well, and that’s breeds loyalty. Whereas someone like Best Buy treats everyone like super-pungent elephant excrement, so they are literally the store of last resort.

    I will only shop at Best Buy if it is something I need immediately, and cannot wait for the item to be delivered.

  • http://ianmrountree.com Ian M Rountree

    Yet more proof that economics can’t be simplified and properly expressed by either simple keywords, or by simplified mathematics. I don’t think we give economists enough credit or maybe enough blame) for chopping up our society into digestible bits.

    Perfect example; My store’s been seeing major losses. We thought we were just sucking, or it was the economy. Simple KPI study shows we’re all doing our jobs, the volume just isn’t there. So we blamed it on losing a key salesperson.

    Then we found out the whole mall’s foot traffic is down 70%. So we’re winning, by those statistics. Doesn’t make “X% loss” look any happier, but at least it gives good reasons.

    And that was less than an hour’s worth of digging to explain a month long trend. I wonder how much time marketers and analysts spend on calculating ROI on, say, changing the “Buy Now” button from green to slightly brighter green before they go up on the roof and congratulate themselves with some more blow.

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  • Rob S

    This is the argument I get from people that don’t think you need to prove ROI on anything. Marketing is about driving additional revenue to your business, either through immediate sales or improvements in long term base consumption. Both can be calculated.

    Your examples are a bit simplified. For the purposes of determining ROI, you’re looking at the return on investment for controllable expenses. You have uncontrollable and exogenous variables, which may be reflected as unexplained variance or part of base volume.

    You are also looking at the ROI for the primary causal driver. If you’re running an instore display, your primary concern is the efficacy of the display. You assume a certain homogeneity of the environment (which must be statistically supported).

    Store attribute facts can be tested. We look at performance of stores by their layout, but that’s not ROI. That’s outlet characteristics.

    The questions isn’t whether you should calculate ROI, but to what level of ROI calculation provides meaningful, actionable results for your specific circumstance.

  • http://www.justinkownacki.com Justin

    Rob: You’re obviously an expert in your field, whereas I’m just a guy writing a blog. But you cannot convince me that “outlet characteristics” are not a facet of ROI. “Outlet characteristics” are something you invest in, just like any other aspect of a business, and they have a direct impact on sales and profits.

    I never said we shouldn’t measure the ROI on anything; I said we need to measure the ROI on *everything*. I’m glad marketing is so easy to track and judge, but where’s the wealth of interest in every other variable that affects the bottom line? Or is this the exact same debate I’d see raging if I stumbled into a countertop sealant manufacturers’ convention?

  • http://www.blog.upspringbaby.com Amanda Quraishi

    I absolutely loved this post and I included it in our Week In Review today: http://blog.upspringbaby.com/2010/01/29/week-in-review-january-29-2010/

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  • http://www.nicwindley.co.uk Nic Windley

    I agree Justin that every part of your business has an effect on the overall outcome, however the contribution of each individual component or its effects on the whole process vary significantly and for each business, and I believe that they may also change as the business evolves and changes in size or reach.

    None the less you need to have some way of regaining control of your marketing, sales and expenses by understanding what the impact is of what you do or how will you know if you have it right ? This is especially true for SME’s and micro businesses.

    I agree with Rob in that you need to have an ROI at the core of what you do i.e. we do this, it costs us that and the return is….

    Once you have the basics right and assuming what you are offering is what your market wants (research, test) you can then move onto less direct or measurable activities and see what impact those have on your baseline metrics. But now you are measuring them against something so you can still get an idea of what happens when you do something or the cost / return of that component.

    Its obvious that the position of a plant pot on a shop window sill will have significantly less impact than the effectiveness of your current promotion which is being sent out to hundreds or thousands of your customers!

    Without knowing where you came from, there will be no way of knowing where you should be headed….and there is a ton of waste in sales and marketing that could be eradicated.

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