Truth, Lies and ROI
We love numbers, but only when they are used meaningfully and truthfully.
We’ve become obsessed with a very limited, and, not so meaningful definition of ‘value’– ROI. Now before everyone gets out their poison pen, this isn’t an article about throwing the need to measure out the window, but a rethink on how we constitute and understand value.
For a long time, ‘success’ has been defined through a proportional relationship; the less money I spend, and the more I get back, the more successful I have been. Although what seems good for the bank, is not always good for the brand, or the business.
The problem is that we are confusing measurability with accountability and forgetting Goodhart’s law in the process, 'when a measure becomes a target, it ceases to be a good measure’. Companies need to ensure that the activities they undertake are worthwhile and effective. ROI, especially fabricated ROI isn’t a measure that achieves anything.
Part of the problem is that in a brands quest for accountability in how their marketing budget is spent they have forgotten the value of experimentation and what 'value' is. The other part of the problem is how we use what we are measuring.
Everyone needs to ensure that the activities they undertake return something to the business but a fixation on proportional return isn’t always the way. This often leads to a race to the bottom. Take retail, the traditional model is a weekly management of sales figures where hitting a fictitious number today is more important than ensuring long term success. When’s the last time you remember a high street retailer not being on sale or cutting corners in service delivery?
Isn’t the current mantra 'every touchpoint matters to a customer', why try to take money out of the experience? Wouldn’t it be better to evaluate if that is the best spend of the money?
This is an industry that needs to UnThink its approach. What is the long term game they are in and how best to get there? This is also an industry that's only just starting to see the convenience economy take hold (but more on that in another article). The numbers aren’t the tool or the strategy they are a measure of how well it is working not the sum of success.
We need to make sure that when we talk about ROI, we need to make sure it's meaningful and purposeful. If the goal is experimentation, we need make sure that’s what we’re measuring. The accountability factor is in how it's designed and what it's trying to uncover. Let’s make sure we don’t lie with the numbers.