The Never Ending ROI Story, Part I

by editor , David Baker, Jun 27, 2005, 2:18 PM

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You might be saying to yourself, "Not another return on investment (ROI) article." But if you answer yes to the next question, then you should file this away for another day: Are you generating excitement and interest when you present your e-mail ROI stories within your company?

Calculating an ROI is not as straightforward as it seems. ROI is a frequently misunderstood process that typically leads to a lot of discussion and one, seldom believable, report. As we have all been taught, it is usually about generating numbers and making them add up to justify your efforts.

You would think it's a perfect match for e-mail because e-mail is a consummate numbers driver. The challenge, however, isn't in reporting the numbers; rather, it is in interpreting these numbers so they convey a meaningful business story. In my experience, ROI has been poorly represented in e-mail programs. It should be looked at relative to the type of program you run, and should represent both tangible and intangible elements. So, how can you tell a better ROI story?

Let's start with a profound statement: ROI is not merely about statistics, it's about interpretation. It is somewhat like the difference between "analytics" and "analysis." In our world of e-mail marketing, if there isn't a causal relationship between an e-mail and it's effect on a transaction or measured financial benefit to the company, most struggle to present a compelling ROI story. For example, how many of you can produce a good ROI story for your company e-mail newsletter or annual Christmas e-mail announcement or birthday e-mail program?

These days with so much press about e-mail marketing, e-mail programs themselves are not hard to justify, but communicating their true value to the business and other advertising or marketing channels is. We are forced to be creative in how we build ROI stories and how they draw a relationship to the impact of an e-mail on a customer.

As the venture capitalists used to joke about in the boom dot-com days, the killer app in the late 1990s for gaining funding was PowerPoint. "If you could boot up PowerPoint and tell a good story you could get funding." Today they'll say, "The killer app is Excel." In my opinion and experience, ROI has evolved into the use of both. I'm a true believer in using dashboards and scorecards as a means of monitoring the value of e-mail programs. But like a car dashboard, which tells you everything critical about running your automobile and its health, ROI is not the process of communicating your speed or how much gas you have in your tank - that is reporting. ROI is about communicating where you drove during this trip and the value of your experiences in the car. It's about justifying the cost of the car, the monthly payment, the gas, and the maintenance costs that are associated with driving it everyday.

So, why do we communicate an e-mail program's success through pure statistics that draw no correlations to business terms (open rates, click-throughs, bounces, deliverability)? Rather, these stats should speak to the impact of messaging on the customer, value of the program to your customer, what you've learned through these results, how your team is a marketing machine that drives amazing market insight about your customers based on these insights, and the efficiencies you're building.

I've found four areas that that can give you a broader view for developing your ROI story: financial returns, customer value, internal efficiencies, and learning and progression. Over the next few weeks, I'll write about each and how they can be applied to two companies with differing views of e-mail marketing. And as a bonus, at the end of this series, I'll list a few useful calculators and resources that will help you in building your ROI stories quickly.

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