Getting a GRIP on ROI
February 11, 2010 3 Comments
ROI and social media? It matters, of course. It’s important to measure what a specific investment of dollars has returned by way of dollars – but ultimately, this is a post-hoc measurement, right? When people demand ROI calculations up front, what we’re really talking about is projections – and we need to project more than that.
Looking to try some new initiative? Don’t simply talk about ROI. You should talk about anticipated or estimated impact on goals for something you do or do not do. Thinking about “return” in the direct financial sense is too narrow. Ultimately, aren’t you really all about attaining specific goals?
Let’s change the conversation. Don’t we really just want to get a GRIP – Goal Realization Impact Projection – on everything we consider doing?
Take a business considering the use of social media. For most for-profit entities, the goal is business growth. What we really want to know is, how will our involvement (or non-involvement) in social media impact our growth? Based on trends, case studies, market opportunities, and common sense, what do we project will occur if we invest (or fail to)? Potential ROI is part of this – but it is not the entire pie.
One reason it is important to think this way is that it is impossible, in most cases, to make direct/accurate correlations between specific activities and specific results. Why did that person call a certain realtor to list their house? Was it the billboard they saw that morning, the accumulation of ad impressions in the local paper, the business card found in a drawer, the recommendation of a friend, a 2nd level connection on Facebook, or some or all or none of the above? What’s the ROI on a radio spot at 7:48 am Thursday – or the one on Friday?
Another main difficulty with a more narrow ROI approach is the focus on short-term thinking. But many initiatives have to be designed for impact over the long haul. How many people will try Loveless Cafe in Nashville because of this – 28 years later? And while we’re at it, what about the positive (or negative) non-financial impact that occurs? See Olivier Blanchard’s very smart ROI posts for more on this theme.
On the other hand, getting a GRIP is a much more holistic and sensible approach to evaluating the relative value of any initiative. GRIP can include ROI estimates, but as generally practiced right now, viewing everything through ROI spectacles doesn’t do a great job taking into account the broader issues at play.
One way to “grid it out”:
My friend Olivier Blanchard (who has been critiquing my thought process with this post) brings up a great point – what is the currency or measure that one would use in the GRIP model? My sense is: that depends (don’t you love consultants?). Because the issues and applications go beyond business and dollars, the measures can have quite a variety.
So, here’s a non-financial / non-biz example – someone wants to know if they should set up a personal Facebook page. Main goal: keeping in better touch with family/old friends. Getting a GRIP on this could be as simple as identifying the main factors (benefits/drawbacks/resources), and setting up sliders as a relative scale. What will emerge is that, while there will be a short-term extra effort learning the platform and setting up, the long-term savings of time and effort will far outweigh it.
Similarly, for business, short and long-term financial return, the PR value/risk, the internal resources, the potential direct and indirect “reach,” and other factors all can be put on scales to help figure out the potential for better realizing goals.
The model is still soft clay – what do you think of such an approach? Valuable? Useless? Tweaks? Add your thoughts in the comments…
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