In the May-June issue (members only) of IABC’s Communication World, author and marketing maven Merry Elrick explores ROI on communications, mostly from the marcom side.
She offers up a formula for calculating ROI (gross margin – communication investment)/communication investment = ROI (% total investment). Rightly, Elrick points out the limitations of that method — it only works when there is a direct relationship between communication investment and revenue. I’d add that there will always be disagreements about how much of the increased revenue, higher sales or cost savings was actually attributable to the communication activity in question.
Elrick also offers a list of marketing goals and associated business outcomes — but still makes a couple of leaps of faith. For example, does increased customer satisfaction result in a decline in customer service costs? Does brand loyalty increase long-term shareholder value?
I’d say the answer may be “yes,” but we won’t know without considering the other inputs to the outcomes she describes.
This is a peril in PR – the C-Suite is OK with our taking credit for outcomes within our control, but they tend to minimize their importance. We definitely need to prove the connection between communication outcomes and business incomes, and that’s why research, evaluation and measurement are critical.
We just need to have a better strategy than simply claiming credit.
