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Knowbits When ROI was King Reading as much marketing material as I do, I’m struck by a common, overstated ‘value proposition’ these days: “Return on Investment”, or ROI. Every vendor seeking new business claims they deliver it, and more of it than their competitors. It’s enough to make one yearn for the days of ‘let’s just do it and we’ll prove it works later’. Value to your customer should NOT be stated simply as return on investment. That’s the value to their CFO. What is a value proposition? It’s the tangible goods or services you provide that customers need and want, and are willing to pay you for. And if all those things are good, the customer assigns them value. If you have to convince me of your value proposition – I must not perceive there is one. You have a problem. What you measure is more important than how you measure it. Are you measuring strictly “dollars in” in relationship to “dollars out”? What about “good will”, “customer loyalty”, and “referral rates”? All of those things have traditionally been looked at under brand measurement. But providers of goods and services claim they effect those measurements too – and that should be considered part of ROI. ROI for it’s own sake More and more complicated—and time-consuming—ways to measure effectiveness of actions are being dreamed up daily. There are even companies making a living of measuring ROI, and offering companies sophisticated tools to do so! One provider calls theirs the Value Measurement Suite. Yet another consulting group helps you measure more than ROI. They also measure fun things like TCO, IRR, and NPV with their Customer Payback Methadology! I think I’ll click on through and order one of those gizmos – so I can PROVE I’m adding value, since I’ll be able to measure it. Seriously, I realize it’s important to set goals and measurements for those goals in order to know if you are reaching them. But that’s my point. Instead of falling back on popular acronyms that may or may not have real meaning to you, work off your own needs. For each organization, ROI should be clearly defined. What are you measuring – and what is the value to you. The esteemed professor from Cornell who declares that the cost of analyzing ROI exceeds the ROI of most projects is a man after my own heart in many ways. He proposes instead that you measure Return on Expectation. I agree. After all, what did you expect? Other perspectives on ROI: ROI is king for reckless
IP wannabes. If you have a question or topic you would like to see in Knowbits, write to Donna Lehman.
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Knowbits Archive |
September 2004