ROI has its uses, but does it give you the whole picture?

If I’m the person holding the purse strings, I want to know whether I can rest easy because the money’s coming in, or whether I need to fill a gap in my projected annual income. To make it even clearer, what I really need is to know how much money this activity is going to put into the kitty.

The easiest and most straightforward measure here, is net income. Net income is a no-fuss approach to life and does exactly what it says on the tin. This is how much money your efforts have earned you.

What I like about net income is that it dispenses with the layer of mystery around ROI and shows you where the problem lies. A simple spreadsheet will prove that the amount of money coming back to the organisation is the same when you cut out all the dead cost. If ever my suggestion to reduce the outgoing volume of an activity is met with fierce resistance, you can guarantee that people are only looking at ROI. For me, net income is a quick win.

The performance of customers (or supporters if you are a charity) is a harder nut to crack. I personally use a score, which was shown to me many years ago. It’s the average gift x the average response of a segment. Sometimes you have to multiply the answer by 10 or 100 to get a figure that you can properly differentiate, but it’s a great way to see which segments are performing well, without getting distracted by money. For instance, a small segment may be working really hard, but because of low volume it might not be contributing much to the total income. But now you know who good responders are, so you just need to get more of them.

Getting more good responders is easier said than done, but it’s worth bearing in mind that you’ll want to focus effort on these people: find or create more of them and put effort into getting that second purchase or sign them up for a specific service.

Whilst this blog is really just my rant about ROI and how I don’t like it, what it also shows, in a roundabout way, is that you need to understand what the question is before deciding how to answer it.

When I’m working with someone new to the Data Nerd Game, I challenge them and get them to think about what they really need to know to make the next campaign even better, rather than blurting out the bog-standard request for ROI. But I can only do so much, after all, I neither speak to everyone nor train every Data Nerd.

If this all sounds too much and you need some help sorting out the wheat from the chaff, then give me a call on 01462 226772 to chat through what you want to know and how I can get you the answers. You might be surprised at what you find and how it can change your view of your campaigns.

In the meantime, I’m going off to start a Data Nerds Are Sexy Campaign, whilst Googling statistical theories and SQL scripts. Alas, I may be fighting a losing battle.

If I’m the person holding the purse strings, I want to know whether I can rest easy because the money’s coming in, or whether I need to fill a gap in my projected annual income. To make it even clearer, what I really need is to know how much money this activity is going to put into the kitty.

The easiest and most straightforward measure here, is net income. Net income is a no-fuss approach to life and does exactly what it says on the tin. This is how much money your efforts have earned you.

What I like about net income is that it dispenses with the layer of mystery around ROI and shows you where the problem lies. A simple spreadsheet will prove that the amount of money coming back to the organisation is the same when you cut out all the dead cost. If ever my suggestion to reduce the outgoing volume of an activity is met with fierce resistance, you can guarantee that people are only looking at ROI. For me, net income is a quick win.

The performance of customers (or supporters if you are a charity) is a harder nut to crack. I personally use a score, which was shown to me many years ago. It’s the average gift x the average response of a segment. Sometimes you have to multiply the answer by 10 or 100 to get a figure that you can properly differentiate, but it’s a great way to see which segments are performing well, without getting distracted by money. For instance, a small segment may be working really hard, but because of low volume it might not be contributing much to the total income. But now you know who good responders are, so you just need to get more of them.

Getting more good responders is easier said than done, but it’s worth bearing in mind that you’ll want to focus effort on these people: find or create more of them and put effort into getting that second purchase or sign them up for a specific service.

Whilst this blog is really just my rant about ROI and how I don’t like it, what it also shows, in a roundabout way, is that you need to understand what the question is before deciding how to answer it.

When I’m working with someone new to the Data Nerd Game, I challenge them and get them to think about what they really need to know to make the next campaign even better, rather than blurting out the bog-standard request for ROI. But I can only do so much, after all, I neither speak to everyone nor train every Data Nerd.

If this all sounds too much and you need some help sorting out the wheat from the chaff, then give me a call on 01462 226772 to chat through what you want to know and how I can get you the answers. You might be surprised at what you find and how it can change your view of your campaigns.

In the meantime, I’m going off to start a Data Nerds Are Sexy Campaign, whilst Googling statistical theories and SQL scripts. Alas, I may be fighting a losing battle.