Return on Investment (ROI) is something that many Marketing leaders often can't get a handle on, because it involves trying to get some clear financial metric. However, agreeing a financial metric isn’t the only way to measure ROI on activity within the business. Instead, we need to help the business understand that while a financial benefit ROI is an excellent goal, we should start the ROI process by agreeing Observable Benefits.
While Observable Benefits may be a little harder to ‘measure’ they are a great way to gain consensus on the ‘right thing’ to measure quickly and efficiently.
Benefits are about ‘seeing a resulting change’ in an organisation. Generally, there are four categories of benefits that can be ‘realised’ for Return on Investment: Financial, Quantifiable, Measurable and Observable. You can think of these categories as a type of hierarchy, where once we understand the bottom category, the ability to find the next level is substantially easier. Here we’re focusing on the bottom of the hierarchy - Observable benefits - and how agreeing these, can help you align Measurable benefits.
Observable benefits are often defined by a group of experienced people in a team who all agree that if they can observe a specific positive change in behaviours, systems or processes, then we have a good consensus benchmark to measure the change against.
Now that you are measuring those positive changes within the organisation, we can start attacking some measurables associated with that change we’re expecting to observe. A great place to begin here is an aspect of performance that's associated with the thing the team is expecting and associating an appropriate measure around that.
Observable > Measurable > Quantifiable > Financial
Once you've got something that you can agree will associate behaviours to measurables, the quantifiable benefits are a lot easier to see. By generating that quantifiable data, it's a lot easier to work out what financial measurables and returns are going to come from that. Getting to the point of true financial ROI is tough, so we need to take a few baby steps first to mature into measuring true (and accurate) financial ROI.
Lowering the bar of measuring ROI
So why do we care about making the ROI measurement bar a little lower?
When we think about helping businesses reach their goals, particularly when it comes to marketing technology, it’s all about change. If we can't embed the day-to-day conversation about change, then we are already blocked in moving forward.
Three compartments for benefits
A helpful way to think about the way to look for benefits is by breaking them down in to three compartments:
- Doing new things: This is focused on enabling new capabilities within the organisation, capability that have not been present previously.
- Doing things Better: This is focused on taking capability that exist in the organisation and enhancing them to provide a more efficient approach.
- Stop doing things: This is focused on stopping costs, projects or capabilities within an organisation that no longer contribute to organisational goals.
The above three types of benefits will help you start thinking about what a positive return looks like for you, your team and your goals. Breaking benefits down in this way will help you to have those conversations at organisational level, and will help you get the change that's required for you to be successful.
Observable benefits and MarTech
The reality is, with MarTech we are always looking to get some kind of hypothesis understood, and that is often associated to what the benefit is likely to be. So, start thinking about tying in a key observable benefit, whether it’s doing new things, doing things better, or stopping doing things as part of our goal. Then, you can start proving or disproving your hypothesis and optimising your activity accordingly.
The more data we collect around observable benefits seen through using a tool, the more clarity we have about how to create the change we need in the organisation to reach our goals. The good thing about MarTech tools is that - more often than not - we can find a way to link that observable benefit to something measurable within your MarTech stack.
If you’re finding it hard measure your ROI, financially or otherwise - get in touch with us - we have a knack for helping teams get on the same page and operationally working together, tracking the right things that work towards a common business goal.