Why do we call it ROI? Let’s call it what it is.

October 4, 2009 at 2:41 PM 19 comments

Public relations measurement is still an emerging field, particularly when focused on social media metrics.  I say this because I graduated with a public relations degree from arguably one of the best undergraduate programs, and I took the first ever course on public relations research methods last fall.

As public relations continues to evolve and grow, I am eager to explore how measurement and metrics will follow.  Every day there is something new in the social media space, and I can’t wait to see how each new tool will influence PR and its measurement.

ROI (return on investment) is a concept I first learned about in my business classes in college.  It is meant to be the gain (or loss) relative to the amount of money invested in the first place.  This idea makes itself available for many different kinds of business projects, even social media projects in theory.

More and more lately, there have been blog posts and articles about the so-called ROI of social media.  These articles are trying to get at an easy was to measure how much is gained from social media campaigns, though not in a strictly monetary sense.  The propose equations seem to try to get at the theoretical gain rather than fiscal gain.

I completely support the idea of find a way to measure and prove the worth of a social media or public relations campaign.  I think it’s a necessity.

What I guess I don’t understand is why we must call it ROI when it just isn’t.  More often than not the social media “ROI” articles aren’t comparing the amount of money spent versus that gained.  When something claims to be ROI, it puts out the expectation that it will give the ROI in the business sense.

I feel that using ROI to describe any measurement that tries to explain the benefits of a social media or public relations campaign discredits the measurement presented.  If the creator doesn’t even understand what ROI means, why should I trust their calculations?

And coming from a profession known for its creativity in communications, why can’t those of us seeking to explain PR measurements come up with a more descriptive and unique name than ROI?

Perhaps I’m focusing on the wrong aspect of measurement, but I think it does matter.  I have seen very few uses of ROI in PR measurement that meets that standard definition of ROI.  So why not call it what it is?

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Entry filed under: Measurement, PR metrics, public relations, Social Media. Tags: , , , .

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19 Comments Add your own

  • 1. Richie Escovedo  |  October 4, 2009 at 2:50 PM

    Rebecca, you bring up a good question as well as reminder of just how fluid the PR industry is these days. I’ve heard SM measurement and PR put another way that I particularly like: ROE or Return on Engagement.

    So much of the perceived successes/failures within the social web come down to interactions, conversations, and community that perhaps the appropriate term is engagement and what *that* will bring to the table.

    – @vedo

    Reply
    • 2. Rebecca Denison  |  October 4, 2009 at 2:57 PM

      I agree, I really like the idea of return on engagement because it’s definitely more descriptive of what its being measured. As you say, it is often what is thought of to be the most important thing to be gained in social media.

      I know that ROI is often treated as the catch-all for measurement, but often it is not at all what is being measured.

      Reply
  • 3. jaywalk1  |  October 5, 2009 at 1:41 PM

    Hi Rebecca,

    Interesting post. I think the big push regarding ROI is really about about using a term that business folks can relate to. For the longest while most people on that side would get hung up (and overwhelmed in some cases) because of the terms.

    Our client contacts may get social media, but their broader team and higher-ups may not. Everyone gets ROI to some extent because its about the dollars and what the dollars will get you.

    A lot of it is situational, but if you explain it on a case by case, you probably could get your clients to understand that actual dollars + time invested engaging in an honest dialogue with the right people + (program/initiative/message communicated well) = Y (goal/something of value to client)

    Just my thoughts.

    Reply
    • 4. Rebecca Denison  |  October 5, 2009 at 1:45 PM

      I know what you’re saying, but I think in some ways using ROI in some contexts only makes it more confusing for business-minded folks. They’ll recognize the term but be confused when the calculation doesn’t provide the same answer, so to speak.

      Reply
  • 5. Jackie Adkins  |  October 5, 2009 at 2:07 PM

    I’d agree with Jaywalk above that ROI, although social media people may not see it as being important, is something upper level execs want to see in order for them to buy into the time and money required for social media.

    Instead of try and make my own points, I’ll direct you to a great resource for ROI. Olivier Blanchard has the best ROI explanation I’ve come across so far and, although I’ve never met him or anything, he really seems to be a good guy and knows his stuff. This presentation (http://smroi.net/) is pretty solid and his blog is good too (http://thebrandbuilder.wordpress.com/).

    Hopefully that helps!

    Reply
    • 6. Rebecca Denison  |  October 5, 2009 at 2:10 PM

      I agree that Olivier Blanchard is an amazing resource for ROI, and what he measures is actually ROI. I’m talking about when social media folks use the term ROI to refer to all sorts of measurements (like engagement, clicks, etc.) that are not actually measuring a monetary return on investment.

      Does that make sense? I know I’m arguing semantics, but I feel it’s important to make the distinction.

      Reply
      • 7. Jackie Adkins  |  October 5, 2009 at 2:14 PM

        Ohh ok. I’m with you now. I agree it’s not really ROI when you’re just looking at these non financial effects. Sure, they are the result of social media, but they aren’t ROI unless it’s a financial impact produced by it.

  • 8. Nicholas G. Porter  |  October 5, 2009 at 2:19 PM

    This is a great topic!

    There are some things that will never change and I think what we have here is a classic case of accounting clashing with the creative’s.

    As mentioned above, many folks recognize that an investment will need to see some sort of return; otherwise what are spending our time and money on?

    A new approach to identifying what the ROI for social media campaigns is necessary however explaining it is situational at this point. Until that measurement is definite, the business sides and creative sides will just have to continue to coexist for the sake of the client.

    Reply
    • 9. Rebecca Denison  |  October 5, 2009 at 2:31 PM

      I’m glad you liked the post. I really wish we could all brainstorm a new term for what we’re doing Return on engagement perhaps? I do like that.

      I think you’re right that until we can figure out the measurements, we’ll just all have to learn to get along. 🙂

      Reply
  • 10. Sean Williams  |  October 5, 2009 at 3:03 PM

    Rebecca, you ask a good question. Jaywalk is right. The term ROI is so universally understood in business that we want “in” on that action. Our cousins in marketing can speak ROI because they can point to specific dollar impact resulting from their activities. We in PR have been permitted to avoid that question.

    So much of what we do is reputational that it’s been difficult (not impossible) to quantify it in terms that any business person could understand. This is a problem for our profession. By the same token, we need to realize that some of our activities aren’t linked to ROI in a direct line.

    I totally agree that we should use ROI only for financial impacts, but I disagree that Return on Engagement is a useful alternative. ROE is return on equity, another financial term. Value is a concept we can get behind, however. Engagement value, reputational value, brand value, user experience value…

    That’s really what’s needed — a sharper focus on what the value received is for our activity.

    Sean

    Reply
    • 11. Rebecca Denison  |  October 5, 2009 at 3:12 PM

      I knew ROE sounded familiar to me! Good call on that!

      I like that you say we need to focus on value because you’re absolutely right. We need to use terms that describe what we’re measuring which is usually different types of value.

      We need to be able to show the business-minded that we are of value even if we can’t link it directly to ROI.

      Reply
  • 12. Michael Calienes  |  October 5, 2009 at 4:09 PM

    once everyone’s connected and we’re all doing business and making connections in this way, it will all just be called “income”. for now, however, i’ve been using ROR — “return on relationships”. way to get the conversation going.

    Reply
  • 13. Keith Bossey  |  October 5, 2009 at 4:27 PM

    This is an excellent discussion Rebecca. Although marketers have been more freely using the term ROI, it seems to me that it is misused in this case as well. Too often, marketing expenditures (is it really an investment?) produce intangible results, and even if we wanted to align them with real $ returns, we would find ourselves needing to show a number of links before we finally get there. This might be too simplistic but, I believe that many of the tactics at our disposal shouldn’t be linked to returns, they should be linked to certain marketing goals. These goals role up to a marketing strategy which can and should influence real $ items, like sales. Achieving real tangible returns can only come about through a portfolio approach. Continuing with this metaphor, we don’t (or shouldn’t) measure a mutual fund manager by their trade by trade returns (tactics), they are measured on where the entire portfolio is at a given time. While that doesn’t mean we don’t have concrete rules and targets for our tactics, we recognize that they are a piece of an overall strategy, which has ROI goals. Trying to pin ROI on all of our tactics seems like a tremendous waste of time, therefore lowering our overall ROI. Thanks for starting the discussion!

    Reply
    • 14. Rebecca Denison  |  October 5, 2009 at 4:42 PM

      Thank you so much for you input!! I’m glad that I’m not alone on this!

      I understand that we’re trying to show our value, but why not show what we’re really doing?

      Reply
  • 15. Petar Pavlov  |  October 5, 2009 at 4:50 PM

    Perhaps we don’t need to change the name ‘Return on Investment’, but rather make a clear distinction between a Financial Return on Investment (FROI) and Value-Added Return on Investment (VAROI). And for the latter one, we can use multiple value-concerned metrics for assessment: Engagement Value, Brand Value, Cross Channel Impact, etc.
    There is no and there WON’T be a universal formula for assesing these metrics. The approach must be client/project based.

    Reply
  • 16. jacob morgan  |  October 5, 2009 at 9:00 PM

    Hi Rebecca,

    I’ve definitely talked about this quite a bit; I should also mentioned that I’m not a PR guy. As you said, I refer to ROI as a financial metric aka dollars in vs dollars out. Results that are gained which are not financial I refer to as impact. So in other words if you spend 10k on a campaign and received 100,000 eyeballs, then those eyeballs are the impact of your campaign and not the ROI.

    The challenge is that ROI should encompass 2 things:
    a) the ability to bring in money
    b) the ability to strengthen the brand

    The component that most PR professionals focus on is the later but rarely do they incorporate the former. So again, anything $ related is ROI, anything non $ ROI can be impact.

    Hope this makes sense.

    Jacob

    Reply
  • 17. KDPaine  |  October 6, 2009 at 5:34 AM

    good for you to take on this topic! you are SO right about the misuse of the term ROI — AND the need to use the language of business when you’re talking measurement. Keep up the fight!

    Reply
  • 18. Jonathan Moody  |  October 6, 2009 at 6:17 AM

    This is an interesting debate that has been taking place across several media. I must admit, I tend to agree with Chris Lake of EConsultancy with his argument that:
    “I’m obviously all for measuring ROI, but am macro rather than nano when it comes to social media. Measuring TV ads is still finger in the air stuff, as is print and direct mail. Yes, you can do it (with varying degrees of accuracy), but marketers attribute success to campaigns if sales increase by x% in a given period. It’s a bit like that with social media, as far as I’m concerned.”

    I also think that with too much concern with micro level detail, ROI can become Risk of Inaction.There can be a clear opportunity cost for not involving social media across departments and in some cases there might be cost savings instead of actual “returns”.
    See the following link for more on this: http://econsultancy.com/blog/4640-social-media-roi-is-it-worth-waiting-for

    Reply
  • 19. Mike Coombs  |  October 6, 2009 at 10:23 AM

    Marketers must speak in terms our customers understand. ROI is the accepted way that business people will start the conversation about “value”. If they want ROI…give them ROI.
    Because…
    Accounting terms (you’ll be shocked! I was) vary from company to company, discipline to discipline. The formula that one company uses often has little bearing on the way the company next door uses the term or formula. Even a term as seemingly simple as “profit” can be inexact to business and accounting types from company to company.

    We must agree on a measure with the people who matter in each situation. And track it over time so that you (we) can see the relative improvement/loss versus the investment.

    Beware of the idea that any single term or formula or exact definition for ROI can be applied across the board. The term that works best is the one that the team you are on values, understands, and can use.
    The only thing I am sure about is that we must measure and show value in some way that is understood and appreciated by our team/company/client and that somehow does get to a dollar conversation.

    SEO/SEM people always want a dollar number on the value of “a lead”. Nobody knows what any specific sales lead is worth, but over time we know that this x number of leads turns into x number of sales. So we create the “value” of a lead for that situation.
    So what are varying levels and types of engagement worth in the business situation you are in?

    Reply

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