The New Model Of ROI: Return On Interest.

ROI is either a flag you wave in every meeting you enter, or it’s a curse that follows you around daily, depending on your point of view and level of comfort with data. I would like to propose a different definition of the model for ROI, one I think is more relevant for this day and age of social media: the return-on-interest model.

The typical definition that people are used to for ROI is return on investment, a definition that has dominated Internet advertising since 1994. The simple way of looking at that model is to see what you spent and what was returned in terms of sales or other actions, and compare the two in a flat ratio. It’s a two-dimensional model that only takes into account the immediate, short-term actions of the user — exactly why the industry designation of an attribution model is so important and also so difficult. This measure is one of immediate gratification, and does not take into account the impact you have on consumer perception and the long-term actions of your potential audience. It also discounts the value of initial impressions because they don’t drive the click to a sale. So it’s a flawed model.

In the age of sharing and social media, to create interest in a brand, product or service is just as valuable as the immediate action. You can even argue that it’s more important because there are very few purchase decisions made on the spur of the moment. Most purchases are not impulse-driven, and in that case the existing ROI model is as flawed as the window by which you measure. If you’re only measuring a window of seven days, you have no idea what happens after that window expires.

If you take into account interest levels when evaluating your marketing spends, you can start to see a longer-term impact. I define interest as a formula that combines measures of buzz, sharing and virality as well as increases in activity like searches and immediate actions such as inquiries and sales. If your campaign is in market and you are seeing an increase in these kinds of metrics, either through online, call centers or even at retail through retail buyer inquiries, then your campaign is working and you are able to see the true impact beyond the seven-day window of immediate impact. As the saying goes, Rome wasn’t built in a day — and neither was a truly effective online media campaign.

I should start by saying there is no magic formula. What I use to create and measure for my campaign will not be exactly right for you. You need to have some historical data to work from, but what’s great about using the return-on-interest model is that you don’t need a year’s worth of data. To create an effective measure for ROI, you can actually get started with two to four weeks of data. If you have a recent baseline of activity in both online and offline activity, you should have enough to get started. It may be directional at best, but it should be enough.

Start by creating a table that shows online and offline sales over a period of 24-hour increments, and map that against a measure of buzz (you can get this from any of the various social media analytics sources), search data (see Google and other search engines), site traffic (Google Analytics or others), and any data you can extract from your buying department responsible for interaction with retail partners. These folks are valuable because they can help you see the retail impact of your campaign. Once you’ve mapped these numbers in a day-by-day basis for the last month, then you launch your campaign, start to track these metrics in relation to your spend, and assign a value to each metric. The value is up to you and can be derived from your internal calculations of lifetime customer value and margin on the sale. Once you have these all in one place, you can start tracking your true ROI: the return on interest you generate in your campaign.

If your dollars are spent wisely, and if your digital efforts are socially enabled, you can start to see interest levels rise. Assuming that your product is a hit experience, the interest level should result in an increase in sales volume. If the spend does not create an increased return-on-interest level, then either your targeting is off, or your creative messaging is not resonating with the target. Both can easily be rectified, but at least by having these metrics, you’ll know!

Return on investment is a good place to start, but more mature marketers will start to look beyond short-term gains to find the long-term opportunities for creating relationships and loyalty with their consumers.

Are you calculating a return-on-interest level?

By Cory Treffiletti
Cory is president and managing partner for Catalyst SF.
Courtesy of MediaPost.

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