The ROI of Measurement: What’s That Information Worth to You?

Lefty

 

When it comes to public relations and marketing, there is a lot of focus on determining the return on investment (ROI) of tactics, campaigns and strategies. But what is often missing is the ROI for the measurement itself.

As a brand manager, you can feel pretty burnt when you’ve devoted thousands of your budget this quarter to research and what comes back is a spiral bound pamphlet of a PowerPoint deck spewing a lot of things that you already had a strong gut feeling for.

It can be pretty daunting when your agency recommends a measurement approach that’s in the tens of thousands. Those are dollars that could be directed towards additional tactics.

How do you know that your research has any real value? How do you know that the information is worth what you are paying for? What is the ROI for having research and measurement in place?

This is actually a very straightforward calculation to make. You simply need to answer:

  • How confident are you that you are making the right decision?
  • How much do you stand to benefit from being correct?
  • What will it cost you if you are wrong?

Say you’re running a million dollar campaign to drive trial of a product; the goal being to bring in new customers. You’re targeting a demographic several steps removed from yourself and so while you are liking the direction that’s being taken there is some doubt whether it will resonate with your intended customers.

The value of having perfect information, of making all the right decisions and no strategic missteps is the sum of the costs and the gains:

  • The cost of being absolutely wrong is $1M: the cost of your campaign.  You spend your money, keep yourself, your team and your agencies busy for a couple of weeks and change nothing.
  • With the lifetime value of a customer and knowing the intended goals for reach and conversion of the campaign you can estimate what you stand to gain if your decisions are right. In this example, we’ll say that comes to $5M.

Suddenly the value of information becomes very tangible in dollars and cents and you can begin to make informed decisions as to whether it is worth the cost to pursue.

There is no such thing as perfect information.  But we all have a solid sense of how confident we are before pulling the trigger.

If you were 95% certain that you were making the right call, then there is very little value in further validation. But if you’re making a call that will determine millions of dollars and you’re feeling it’s a coin toss as to whether you’re right, suddenly a few thousand to validate those decisions becomes the bargain of the century.

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