ROI Is Dead — Long Live ROI

"Some things that count can't be counted;
some things that can be counted don't count" – attributed to Einstein

MBAs, accountants, financial analysts, and many others have been trained to evaluate activities by their Return on Investment (ROI). This has often been honored but ignored. Particularly in marketing initiatives such as mass media advertising. In this case, the often large expenditure is either accepted of faith or evaluated against questionable criteria such as recall.

The issue of ROI returns when asking questions such as should you mount social media initiatives such as blogs, wikis, or a presence on Twitter. The ROI question was prominent at this mornings Social Media Breakfast. The good folks at HubSpot, have provided a video of the talks.

A broader and I think more appropriate question is what is the value of a social media (or any other program)? This begs two kinds of questions – relating to benefits and costs. Some authorities such as David Scott
Wish to finesse the question entirely. At a recent seminar I attended, he asked “what’s the ROI of putting on your pants?”

I think the question or something like it deserves an answer and you should expect it to be asked.

There are a variety of conventional and emerging ways of tracking traffic, repeat visitors, time visiting, mentions, searches, etc. Of course, it always pays to ask customers how they found you. In aggregate these are more comprehensive than measures of traditional advertising, but not as compelling as measures of direct response advertising.

Costs for new media can and generally be far lower than traditional media. A viral video on YouTube need not and generally should not have the same lavish production values or costs as that for a 30 second prime time spot. The key to mew media success is rapid experimentation with low cost programs. Low cost does not mean free. The person who blogs, follows twitter, maintains your Facebook page, etc. could always be doing something else. Managers will always have to use judgment. Reasonably designed tests of social media should be cheap enough that they approach the Nike test of “just do it”.

Marketer Of The Year

Marketing publication, Advertising Age, recently chose its 2008 marketer of the year. Finalists included such familiar and prodigious brands as Apple, Nike, and, for its turnaround, Coors. Accomplished as the contestants were, the winner overshadowed them. It grew his brand from obscurity to ubiquitous name recognition in the US and wide recognition globally.

We could dismiss Ad Age’s choice. What cannot be dismissed are the accomplishments of this marketer.

• The product rose to category dominance over a dozen competitors, many of which were initially better known and funded.
• A self financing MARCOM budget exceeding half a billion dollars
• A dominant market share of 53% with November sales exceeding 65 million units.
  
• A devoted group of product fans and evangelists.
• A multi-channel affiliate network.
• Integrated inbound and outbound marketing campaigns through families of web sites, blogs, text messages, newsletters and email. Online media were matched with massive national and locally targeted TV advertising (this may have appealed to Ad Age). Paid media coverage was dwarfed by news coverage of product development and launch.
• Leading in every age category except for those 65 and over.
• Mastery of new media, word of mouth and viral marketing as shown by having more than:
  
• One hundred thousand followers on Twitter
• 150,000 results on Flickr
• 900,000 results on MySpace
  
• 3 million supporters on Facebook
• 400,000 videos on YouTube
• 90 million results on Google

This brand is still in the early stages of its life cycle.

If you haven't guessed already, the marketer of the year is Barack Obama

Crunchy Time — Will User Generated Commercials make The Superbowl a Winner?

The Superbowl does deliver a mass audience. Nielsen estimates that TV audiences for the Superbowl game have been on the order of 90 million per game for the past decade. As in many other cases, size may not be decisive.

As regular readers of this blog may remember, I have a low opinion of advertising on mass events such as the Superbowl. They are expensive and have not been shown to be effective. Their ROI would be small, if their results were measurable at all. It is more reasonable to look at these campaigns as boondoggles. Corporate execs and key clients have a fun weekend at someone else’s expense.

An interesting case is Doritos, one of Frito-Lay’s chip brands. Not only does Doritos want you to consume more of its junk food, it also invites you to make a commercial.

There are already quite a few do it yourself video contests from Apple’s Insomnia Film Festival to freecreditrepost.com lip synch contest. Doritos differentiates its contest by offering the winning commercial to be shown during the 2009 Super Bowl and with a top prize of $ 1 million – not bad for a user generated 30 second spot. A reading of the contest rules shows that Doritos is likely to pay only $ 25,000 and a trip to the game.

Social media introduce another dimension. Their marginal cost of redirected media, including Superbowl ads, can be very small. With user produced ads, Doritos will save a bundle on creative and production costs and generate a lot of customer input. If the winning campaign goes viral in a significant way it will extend reach and frequency beyond those who saw the game and may or may not have seen the commercial.

ROI or not, the Superbowl and the ads which make it possible, will be around for a while. For those advertisers, going viral and employing user generated content should at least allow for an extra point conversion.

Driving Into A Ditch

Hertz car rental joins Alamo, Enterprise, and National in raising rental by about 10%. Hmmm, we are in a recession, both business and consumer travel are decreasing. The cost of new vehicles of the type bought by rental companies are also falling as Detroit tries to unload its products.

Let's not accuse the (in this case) car rental industry of being overly alert. According to today's Wall St. Journal (10/29/08, p D5) other companies are "...going to wait and see what competitors do and then consider raising rates..."

This could be an opportune time to increase share and loyalty by keeping prices level. Speak to your customers concerns about the economy. Social networking programs would be particularly cost effective here. If your competition wishes to drive into a ditch in tandem, for example, by increasing prices at the wrong time - so much the better.

And The Real Winner Is...

This November Fourth, the most expensive product launch in history will end.

The campaign has been interesting to practitioners of non-traditional media of all political persuasions. Blogs, webinars, Tweets, ‘zines, established social networks such as Facebook, as well as special purpose online communities have enabled even obscure aspirants to become contenders. For example, new media enhanced and extended the candidacy of Ron Paul. With them, he could mount a boot-strap campaign becoming better known and then raising more funds in an increasing cycle.

There has been a marked difference in effort and effectiveness of employing new media among the candidates. Obama’s campaign has been far more active and effective than McCain’s. This has propelled Obama’s advantage in fund raising and via social-networking increased his online coverage versus that of McCain.


Obama has raised over $600 million and McCain more than $ 350 million[1]. What can you do with such a marketing budget? New media are so effective and efficient, that it would be really hard to spend it in that way. Thus the campaigns are buying huge amounts of airtime. This leads to the ironic result that the real winners of 2008 are old media.

[1] There are a number of other active candidates, such as Ralph Nader. According to Federal Elections Commission data, total amount raised by all other candidates is less than 0.5% of what McCain and Obama have raised.