Everybody talks about ROI, and it has long been a key pitch point for interactive over traditional media. But lately the term has taken on a few different meanings. The reason for these new definitions is in part due to our current economic climate, and also how ROI will change as interactive media becomes more accountable in 2009.
For some, ROI is seen simply as a media performance tool. Others look at it as the basis for determining where to allocate marketing resources, or as a way of determining revenue growth projections. In a tanking economy, ROI is king. But as is the case with the emperor and his misunderstanding about clothes, the reality and perception don't always match.
A simple way to define true ROI is the ability to answer one question: "How much more revenue will I generate if I spend $X more?" Without a closed-loop sales function, it's a hard question to answer. It gets even harder if you operate in a highly competitive category, where multiple manufacturers and brands participate in the full spectrum of marketing activities. On top of that, add a three-tiered distribution system -- as commonly used in the pharmaceutical industry -- and the going gets really tough.
Further complicating the matter is the sheer amount of data that digital initiatives generate, and the false hopes it creates: "My CTR is getting higher, the time spent is increasing, and I'm getting more page views. This must mean something good, right?"
There is one way to approach ROI that is both simpler and more complicated than most. It is simpler, because it doesn't rely on a black box or fancy algorithm, and more complicated in that it requires an organization to align behind common insights and beliefs. It starts by researching the right data, ensuring clarity on what those data really means, and then creating a series of insights that drive overall marketing thinking.
In doing this, ROI ultimately becomes a "living" concept -- an approach to marketing accountability, rather than the "answer" to a temporal spending impact question. It's through an organic journey that a positive framework for ROI is built into a company's overall culture, accelerating overall accountability throughout the organization. This approach is done by looking at ROI in three different ways.
1. Determine a key driver framework
The first (and most critical) phase is to outline the business drivers and their relevant impacts. Certainly, there are many modeling programs that isolate, or "black box," multiple factors, but instead, try a predictive approach, which requires looking for actual behavior. This includes "virtuous pathing," a limited qualitative and quantitative assessment of brand and competitive users that assesses familiarity and purchase levers. Through well-designed qualitative work, a small-scale quantitative follow-up can be constructed to dimensionalize the findings. Within this framework, you can begin to identify key drivers and build awareness and familiarity.
For example, while many pharmaceutical brands share key drivers for interactive campaigns -- such as physician referrals -- there are numerous instances of other proxies for driving requests, including peer opinion leaders accessed through online communities. Understanding the relative impact of each of these levers is a critical step in driving the right types of actions in overall marketing plans.
2. Test and learn (and test again)
The second phase of this approach is test and learn scenarios, where the goal is to optimize and refine the levers that are driving results. This is often where the surprises lie -- for example, with a registration card or a physician referral experience. We can then evaluate and test simpler, more effective, or more efficient approaches. If the questions are altered (Is there a higher signup rate? What about the offer?), you may find that more isn't always better.
3. Create engagements
With a thorough understanding of the key levers (more than one or two are often needed to drive true familiarity and requests) and an optimization plan for each lever, the third phase is the most familiar aspect of driving digital ROI. It's about creating engagements that help drive prospects to the levers that will drive the business. Again, testing and learning is a critical aspect of optimizing media and search plans to ensure that the right prospects are being targeted and you efficiently drive as many prospects as possible to the most compelling levers.
Overall, ROI is not a set of numbers. Rather, it's a usable framework for thinking through the complex equation that brings an unaware prospect into a franchise. It's an iterative, organic learning process where success is the step-by-step recognition. Most importantly, when aligned throughout organizations, we're released from the tyranny of delivering a "magic" number, and can instead focus on delivering meaningful, actionable solutions.
Richard Newman is president of Greater Than One.
