Tag Archives: don e. schultz

Two secrets to estimating digital communications ROI

Digital marketing has always been a paradox. It is two things simultaneously: Extremely expensive and nearly free. It is pricey because the skills needed to stage digital campaigns and “collateral” are still rare compared to those needed to stage traditional media efforts. And it’s free because once you’ve published the material, every incremental interaction costs a fraction of a cent. So how in the world do you estimate a digital return on investment (ROI)?

Here are two trade secrets. In honor of the fast-approaching close of the summer vacation season, I’m going to use a road trip as a metaphor.

1.) Focus attention on the speed of your progress and not on whatever city is currently outside your window.

Web metrics are notoriously untrustworthy. They may be off by 11.5%, or -18%, but of one thing you can be sure: They are never exactly correct. Living with this imperfection requires both a diligent focus on precision and a resignation to the medium’s inevitable “slop.”

Road Trip, Creative Common photo courtesy of Jim FrasierThe solution is to chart metrics over time, using the last period as a benchmark for this one. A saving grace of web metrics is that as imperfect as they are, they’re always imperfect in perfectly identical ways, month after month (assuming nothing technically has changed).

2.) Remember the cost of the car as you calculate what you’ve spent.

Break the costs of your trip into two: Fixed and variable. With the car trip metaphor, you need to remember that part of your costs are sunk into an asset. Whereas the gas, oil and accelerated depreciation come from the variability of the trip, the expense of the car itself is fixed — something you would have to pay even if you left the car at home.

In the same way, every communication is a contribution to the maintenance of a crucial intellectual property: Your brand. Whether you did nothing this month to burnish that brand, it is still an asset — a source of wealth. (Consider this: You can’t sell a vacation you’ve just had, but you can sell the car you took it in!).

You spent dearly in the past to get your brand where it is today, and you should acknowledge that every investment in communication that mentions the brand is like the replacement of a radiator hose or car battery. It helps retain the brand’s value.

Don E. Schultz and Jeffrey S. Walters, in their book Measuring Brand Communication ROI, used a different metaphor. They compared a brand to a physical property (instead of the intellectual property that it actually is). Should you stop spending every year on its upkeep, it will begin to crumble, and will eventually fall to the ground. In digital marketing efforts, this spending is a portion of every PPC campaign, every email blast, every social media initiative.

What fraction of your digital spending should be put toward the “car” and not the “gas and oil?” That’s the subject of another day. But simply shifting to this paradigm is progress.

Take these two tips to heart and you’ll be well on your way to reporting reliable ROI.

Are you in the Milwaukee area? Then you can learn more when I speak at C2’s September Five Dollar Friday. On the afternoon of Friday, September 18, I will be a co-presenter there, as part of an exciting exploration of “crucial web acronyms: SEO, PPC, SEM,” and — ultimately — ROI!

Is datamining Twitter conversations worth it?

What started with a piece by David Berkowitz on MediaPost (registration required), on Ten Ways To Decide If Your Business Should Tweet, has turned into an interesting conversation about using Twitter to support a brand, and especially about measuring those efforts. This conversation has been primarily through this lengthy post from earlier today by Marshall Sponder.

Marshall makes some excellent points (he’s not @WebMetricsGuru for nothing!), including this one: “Social Media isn’t really designed, at this time, to analyze Acquisition or Retention but Web Analytics, is — and I maintain this is one of the strongest arguments to merge the two, in a formal way, rather than in an informal way.”

Datamining and CRM

How do you begin merging these data in a “formal” way? Tools are emerging to allow for the mining of conversations, and linking them where possible to a CRM database. Here’s Marshall’s take on this process:

David Berkowitz talks about Target Audiences, but you’d first have to figure out what your Target Audience is for your Brand or for a particular product or promotion of your Brand – then do CRM datamining using house database lists, or the Social Media CRM outreach to collect names and classify them according to Target Audience Segmentation — best done with data analytics.   Let’s say, that for the purposes of this post, my article on Entrepreneur.com on Learn to Measure Your Web Presence using Unbound Technology or Rapleaf, is the way to go.

If you’re a mom-and-pop shop, you’d do nothing as elaborate, more just Twitter research, much as I’ve shown above, but if you’re Zappos, or Dell, well … that’s another story — the story I tell in Learn to Measure Your Web Presence and others, like it.

Of course, a big brand can make a lot of money whereas the mom and pop shop, probably won’t — so a big brand can afford to spend a lot of money on data mining — and it’s well worth doing because of the potential money and value that can come from it.

Scarcity of Resources

The biggest constraint in doing this sort of work isn’t technology. It’s time. Even properly guided, the process takes many people-hours, and that is a resource in short supply for most businesses today. I see a major challenge in the linkage between prospects / customers and Twitter profiles. (Ack!, I can hear you yell. Yet another datapoint to capture in our CRM databases: The client’s Twitter handle!)

But it is becoming clear that this is an area where a business should focus some of its energies — assuming the business passes David Berkowitz’s Ten Ways test.

Years ago, Don E. Schultz co-wrote Measuring Brand Communication ROI. In this marketing chestnut, he and his co-authors built a surprisingly relevant model for tracking spending and estimated returns for each brand communication (How old is this book? The included Excel file was loaded on a 5.25″ magnetic diskette). A huge category — and ROI black hole — was customer service.

Twitter is a communication channel more than a marketing tactic, and this channel has more to do with customer satisfaction and brand education than driving sales. It’s another touchpoint and nothing more.

But like email and other important touchpoints, it should be measured. Conversations like the one taking place today will help determine how this measurement takes place and to what end.