2

How the ROI Methodology Works

Stones from other hills may serve to polish the jade of this one.

CHINESE PROVERB

National Investment Corporation (NIC) is a large financial service firm that provides investment and insurance products to customers nationwide. It was founded in the 1950s as an insurance company that primarily serves farmers in the Midwest. Today, it serves customers in 23 states, although the bulk of business, roughly 70 percent, still comes from customers in the Midwest. NIC’s financial products include stocks and mutual funds, annuities, life insurance, home and auto insurances, long-term care insurance, and financial planning and trust services. For several decades, the company has managed to grow the business with a very successful marketing and sales strategy that emphasizes customer relationship management.

Richard has recently been appointed as the marketing director of NIC. After graduating with a marketing degree from college, Richard has worked a plethora of jobs in the insurance and financial service industries. Equipped with business acumen and personal selling skills, as well as marketing and management experience, Richard is confident that he will succeed in this new position.

However, the current situation at NIC is far from ideal. First, the sales revenue number has been flat. Specifically, the firm has seen its annual growth rate decreasing from 15 percent five years ago to less than 1 percent last year. Sales revenue per customer of NIC, an important measure of marketing and sales effectiveness, has been reduced below the industry average by 20 percent. In addition, records show that the number of customer complaints has increased to 120 per month, and most of them are related to customer service quality. Meanwhile, NIC’s rate of staff turnover, roughly 30 percent, is much higher than the industry average, which is around 15 percent in this market.

Richard and his team conduct a series of analyses to explore the performance gaps, which reveal that one of the pain points is NIC’s slow response time to customer requests. Customer surveys confirm this finding, as many customers cite slow response times as the main reason for their dissatisfaction with customer service. Richard and his team collect historical data from company records and conduct one-on-one interviews and focus groups to further understand this issue. These analyses point to a potential root cause, ineffective customer relationship management (CRM).

A task force made up of representatives from sales, marketing, finance, information technology, and training examined several solutions for improving relationships, including a variety of CRM software services. After comparing features and prices of multiple options, Richard chooses to implement a CRM service package with both on-site and cloud-based versions. The software package is called CRMNow!, which is designed to turn contacts into relationships and relationships into increased sales. It features a flexible customer database, easy contact entry, a built-in calendar, and a to-do list. CRMNow! enables quick and effective customer communication and is designed for use with customized reports.

Sales consultants of CRMNow! claim that they can help NIC with customer acquisition and customer retention, as well as improve customer profitability. Since NIC has never used such a service before, Richard decides to conduct a pilot study to assess the functionality and potential success of CRMNow!. Instead of purchasing the software for each of the 4,000 financial advisors, he is planning to implement the software for 60 financial advisors and test its effectiveness and efficiency. The implementation process involves a one-day meeting to teach the financial advisors how to use the software. The CRMNow! software will be demonstrated and used at the meeting. If adopting this software yields the appropriate return on investment, NIC plans on implementing the software and one-day training session for all its financial advisors throughout the company.

Richard has heard about the ROI Methodology but does not know the details of it. He is wondering whether and how this methodology may help him properly measure, evaluate, and demonstrate the value of his strategy, compete for funding and support for marketing, and ensure the best usage of NIC’s resources.

Using Six Levels of Data to Measure Value

As discussed in Chapter 1, ROI in marketing builds its framework around customers’ decision-making processes and evaluates the impacts on business outcomes through a chain of impact. These data examine the value creation process at different levels and represent the inherent richness of the ROI Methodology. Specifically, marketers collect and analyze data at the following levels using metrics that correspond to each level.

Level 0: Input

At Level 0, marketers measure the financial and nonfinancial resources invested into the marketing campaigns, projects, programs, and events. Typical metrics at this level include the types of projects, costs and expenditures, number of customers and participants, number of meetings, tweets posted, emails sent, mobile ads purchased, etc. In an internal marketing program such as the one launched by NIC in the story discussed at the beginning of the chapter, Level 0, Input, can be the number of participants (60 financial advisors), costs related to purchasing and installing the CRMNow! system, number of training sessions offered, number of hours involved in training, etc.

Level 1: Reaction

Reaction refers to the feelings experienced by customers or program participants in response to a stimulus or a situation. At this level, marketers measure the target segment’s reaction to advertisements, products, services, information sessions, promotional messages, etc. In the case of NIC, the marketing director and his team should monitor the reactions of the financial advisors to the CRMNow! system and related training sessions. The extent to which the financial advisors find using the system to be relevant, important, and helpful to provide customer service can be treated as measures at the reaction level.

Level 2: Learning

Learning is the acquisition of information, knowledge, skills, or preferences through exposure to ads, social media promotions, training, and interactions with sales professionals. Although learning itself does not guarantee project success, it is an important determinant of customers’ actions and, eventually, business outcomes. At this level, NIC needs to ensure that the 60 financial advisors have adequate knowledge and skills to use the CRMNow! system in their interactions with customers.

Level 3: Action

Action refers to what marketers expect the target audience to do with what they have learned. The actions may include customers’ phone and email inquiries, company website visits, and usage of coupons and samples. Although still no guarantee of success, these actions generally have significant impacts on business outcomes. For internal marketing programs, this level measures the extent to which program participants apply what they have learned. In the example of NIC, Level 3, Action, refers to the financial advisors’ application of the CRMNow! system to better serve customers. This involves the extent of use, frequency of use, and success with use. At this level, we also examine barriers to use and enablers of use.

Level 4: Impact

Impact measures the desired business outcomes that marketing projects and programs intend to achieve. Typical outcomes include increased sales revenue, profit, number of new customers, etc. The marketing team of NIC initiates the CRMNow! program to improve sales revenue, enhance customer satisfaction, reduce customer complaints, and, the hope is, reduce the staff turnover rate; all are metrics of the business impact at Level 4.

Level 5: ROI

At this level, we compare the monetary benefits of the business impact measures with the fully loaded program costs in order to calculate the ROI, which is the ultimate measure of value created by marketing. In order to calculate the ROI of its CRMNow! program, the marketing team of NIC needs to tabulate both direct and indirect costs related to implementing the CRMNow! system. Also, the annualized monetary benefit of the program would be calculated. This means that sales revenue, customer satisfaction, customer complaints, and staff turnover would be converted to money to develop the total benefits. The impact measures should be isolated to reflect the effect of the CRMNow! program, before converting the data to money. We will discuss the details of this approach in subsequent chapters.

As discussed in Chapter 1, the ROI Methodology can be used by all three types of marketing programs, including business-to-consumer (B2C), business-to-business (B2B), and internal marketing programs. All six levels of data in the framework are applicable to the three types of marketing, but the metrics for each type of marketing may differ. The six levels of data and corresponding metrics are summarized in Table 2.1.

TABLE 2.1 Six levels of data for three types of marketing programs

Creating Alignment

Marketing is a central function essential to any organization. As a core business activity, marketing management is the process of planning, developing, and implementing strategies to serve the needs of the target customer segment and achieve organizational goals. Every year, marketers launch various programs and projects to improve individual, departmental, and organizational performance by leading and managing all facets of the marketing process. These marketing programs consume financial and human resources and are becoming increasingly costly. We need to take actions to make sure the programs are generating benefits that exceed costs and are absolutely necessary.

Research shows that one important reason for a program failing is lack of alignment. Good marketing programs address important business needs and satisfy business goals at different levels. It is critically important to align our marketing program’s objectives with organizational goals to solicit support and resources and ensure success. The ROI Methodology uses an alignment model, also known as the V model, to help marketers achieve alignment for their programs. As shown in Figure 2.1, the model starts with examining needs on the left-hand side and ends with the value chain on the right-hand side; both sides of the model include Levels 1 to 5, discussed previously.

FIGURE 2.1 The Alignment Model

Payoff Needs

The first step in this alignment process examines the potential payoff of the marketing program and asks the following questions: Is this a problem worth solving or an opportunity worth pursuing? Is the marketing program worthy of implementation? What is the likelihood of a positive ROI? Marketers should consider both strategic payoff needs at the organizational level and tactical payoff needs at the functional level to ensure alignment.

Business Needs

The next step is to make sure the marketing program is initiated and implemented to address real business needs, for example, to improve sales, market share, customer loyalty, new account growth, product returns, or customer complaints. Although it is possible for an organization to face multiple business needs simultaneously, these business needs should be prioritized based on strategic considerations and weighed on their costs and potential benefits.

Action Needs

Next, examine the action needs, which are the behaviors that the customers need to adopt to satisfy the business needs defined previously. For example, if the sales are flat, what should the marketing team do to increase sales? What should the customers be doing? What should the sales team be doing? This step can be complex but intriguing. It is critical because it provides the connection linking the input of a marketing program to its intended results.

Learning Needs

After determining action needs, we next examine learning needs. Relevant questions of this step focus on assessing the information, skills, or knowledge that are needed to drive the desired actions defined in previous steps to now determine what can change. Every marketing program involves a learning component, no matter if it is a business-to-business, business-to consumer, or internal marketing program. The needed knowledge may be as simple as knowing where to buy a new product or may be as complicated as understanding how to install new equipment. Depending on the context, the learning can be either active or passive, conscious or subconscious, online or offline.

Reaction Needs

The final step involves examining reaction needs and ensuring external and internal customers find the marketing program and products and services interesting, important, or valuable so that they will want to learn more or take action. Reaction itself is not enough for program success, but it serves as the starting point and initial consideration of the alignment process.

NIC Case Study

Understanding the need for a marketing program builds a solid foundation for the marketing program to succeed. It also enables marketers to develop clear and specific objectives that are communicated to all stakeholders. These objectives should define success at each level and answer the question, “How will we know the needs have been met?” During and after marketing program implementation, we can measure and evaluate outcomes at each level and compare them with the objectives. In the case of NIC’s CRMNow! system, the marketing director and his team may set the following objectives at different levels. The ROI (Level 5) objective is set as “20 percent,” whereas business (Level 4) objectives can be set as “increasing sales with existing customers by 10 percent in six months and reducing customer complaints to below 20 percent in six months.” In order to achieve the objectives at higher levels, NIC should conduct analyses to determine desirable action and learning needs. Based on these analyses, the action (Level 3) objective could be set as “more than 80 percent of the financial advisors who participated in the training program will use the CRMNow! system within one month,” and the learning (Level 2) objective could be set as “90 percent of the financial advisors who participated in the training program understand the steps to use the system.” To ensure proper learning, the NIC marketing team needs to carefully design the promotional message sent to the financial advisors. A reaction objective could be “95 percent of financial advisors find the training program of the CRMNow! system to be relevant, helpful, and important.”

Using Design Thinking to Deliver Results

Design thinking is a very popular concept in innovation and, more recently, in marketing. Although the idea of design thinking emerged several decades ago, it gained popularity in the past years with books like Change by Design by Tim Brown with IDEO¹ and Design Thinking for Strategic Innovation by Idris Mootee.² As a human-centric and holistic approach, design thinking utilizes elements such as empathy and experimentation to arrive at innovative solutions. Instead of relying on historical data or instinct, marketers who use design thinking make decisions based on what customers want in the future by adopting an iterative process. After success is clearly defined, marketers quickly start with ideation and prototype based on the initial level of understanding, actively seek to understand users’ needs by constantly acquiring new information, challenging old assumptions, and willingly redefining problems in an attempt to identify alternative strategies and solutions.

Design thinking is both a way of thinking and a collection of hands-on methods. It empowers the entire team to design for the definition of success, not just validate it. If we want better sales performance, everyone works on it. If we want more satisfied customers, everyone is focused on customer service. If we want to reduce customer churn rates, the focus is there for every stakeholder. With that success clearly and properly defined, the team works through a series of steps, guided by design thinking principles, to reach the desired success. In Box 2.1, we summarize 10 common design thinking principles. These universal design thinking principles inspired us to update the ROI Methodology and create a model to design for results, design for data collection, and design for more investment.³ The first eight principles uniquely influence the 12 steps of the ROI Methodology. The steps and the design thinking principles used for each step are highlighted and described in Table 2.2.

Every system is perfectly designed to get exactly the results it gets.

W. EDWARDS DEMING

TABLE 2.2 Designing for results

(Revised from Patricia Pulliam Phillips and Jack J. Phillips. The Business Case for Learning: Using Design Thinking to Deliver Business Results and Increase the Investment in Talent Development. West Chester, PA: HRDQ and Alexandria, VA: ATD Press, 2017.)

Using the ISPI 10 Standards to Ensure Success

The International Society for Performance Improvement (ISPI) is a nonprofit organization that believes “being better matters.” All the coauthors of this book have volunteered for and served in various leadership positions at the ISPI. For nearly six decades, this organization has been providing tools and strategies for effective and universal performance improvement and helping people and organizations make a difference. Members of the ISPI apply a systematic approach known as human performance technology (HPT) to improve performance at individual, organizational, and societal levels. The HPT approach assesses current performance status, identifies performance gaps and growth opportunities, and analyzes causes, before designing, developing, implementing, and evaluating performance improvement solutions. During the whole process, they follow the 10 ISPI standards as guidance.⁴ We include the 10 standards in Box 2.2.

As you can see in Box 2.2, the 10 ISPI standards emphasize results, outcomes, and value add. The standards are consistent with the ROI Methodology, which also strives to measure, enhance, and demonstrate improved performance and value created by our programs and projects. Similar to the design thinking principles we discussed in the previous section, the ISPI 10 standards also influence the 12 steps of the ROI Methodology. Look again at Table 2.2, where we demonstrate the first eight steps of the ROI Methodology, the design thinking principles, and the 10 ISPI standards influencing them.

The ROI Process Model

One typical challenge facing many marketers is how to use an ROI model to measure and demonstrate value. Some professionals complain that although they understand the ROI in marketing concept in theory, they still do not know how to use it in practice. In this book, we show the step-by-step process of the ROI Methodology and provide tools, examples, and cases to support usage. As shown in Figure 2.2, the eight-step approach in Table 2.2 has been adjusted for the 12 steps with four phases:

FIGURE 2.2 The ROI Methodology

Phase 1. Plan the Evaluation (Steps 1–3)

Phase 2. Collect Data (Steps 4–5)

Phase 3. Analyze Data (Steps 6–10)

Phase 4. Optimize Results (Steps 11–12)

Because of the importance of credibility in data analysis, Phase 3 now has five steps, each labeled with “Make It Credible” at the beginning of the step. We briefly introduce the process model in this section and discuss the details of the 12 steps in subsequent chapters.

Phase 1. Plan the Evaluation

The first phase of the ROI Methodology, “Plan the Evaluation,” has three steps. “Start with Why” is the first step, which will be discussed in Chapter 3. This step focuses on aligning the marketing program with the organizational mission, goals, and strategies. The second step is “Make It Feasible,” which involves selecting the proper solution to achieve the desired impact. The third step, “Expect Success: Plan for Results,” defines success, sets objectives, and clarifies the roles played by the different stakeholders to achieve success. We will discuss Steps 2 and 3 in Chapters 4 and 5, respectively.

Step 1. Start with Why: Align Programs with the Business

We name the first step of the ROI process model as “Start with Why,” because this step defines why we are pursuing the program. In this step, the design thinking principle is to “handle problems on a systems level,” and the ISPI standard is “Focus on Results or Outcomes.” Marketing plays a unique role in implementing organizational strategies. Marketers need to ensure that each aspect of the marketing program is indeed serving that purpose. Depending on the strategic choices made by top management and the challenges facing the organization, marketing programs may be used to improve sales revenue, profitability, and market share, or they may be used to secure new clients and reduce customer complaints. Marketing programs can also be internally oriented with goals like reducing product returns, improving customer response times, etc. No matter what the reasons are, marketers need to define, articulate, and communicate why we are pursuing the marketing program as the first step. For example, the marketing director of NIC chooses improving customer service and sales revenues as reasons why NIC needs the CRMNow ! program.

Step 2. Make It Feasible: Select the Right Solution

In this step, the design thinking principle is “a mindset for curiosity and inquiry.” There are three ISPI standards involved: “Determine Need or Opportunity,” “Determine Cause,” and “Design Solutions.” Marketers need to conduct various analyses in order to identify problems and opportunities, explore cause, and design or select the most feasible solution to achieve the goals set in the first step. Should we modify the product or its package? Should we adjust the price? Should we target a different segment or try a different distribution channel? Should we launch a new social media campaign? No matter what solution you choose, the choice should be justified with analysis, evidence, and considerations of both expected impact and costs. In the case of NIC, the company chooses to implement the CRMNow! system and train financial advisors as the solution to reach the goals set in Step 1.

Step 3. Expect Success: Plan for Results

In this step, marketers set objectives at the impact, action, learning, and reaction levels, as highlighted in the alignment model. The design thinking principle is “a framework to balance needs and feasibility,” and the ISPI standard is “Take a Systemic View.” These objectives should be SMART, that is, specific, measurable, attainable, relevant, and time bound. This step defines success at the impact level so that all stakeholders will understand the roles they are expected to play and will work toward achieving action and impact objectives during the implementation process. Marketers monitor progress, compare with the objectives, and make necessary adjustments if one or more indicators are not on track. Revisions can be made throughout the process in order to ensure success. The objectives also help marketers plan the data collection, data analysis, and communication components, thus completing the “Plan the Evaluation” phase.

Phase 2. Collect Data

Data collection is central to the ROI Methodology. This phase uses two steps to verify success at various levels. Chapter 6, “Make It Matter,” measures success at Levels 0 (Input), 1 (Reaction), and 2 (Learning). Chapter 7, “Make It Stick,” involves data collection to measure success at Levels 3 (Action) and 4 (Impact). The data can be hard data, soft data, primary data, and secondary data, which are collected either internally or externally from online or offline sources. During this phase, marketers need to select the method or methods appropriate for the marketing program within the time and budget constraints.

Step 4. Make It Matter: Design for Input, Reaction, and Learning

In this step, the design thinking principle is “a way to take on design challenges by applying empathy,” and the ISPI standard is “Ensure Solutions’ Conformity and Feasibility.” The ROI in marketing is a customer-centric approach. We design solutions for a marketing program by considering customers’ reaction, learning, and action as well as the impact of these lower-level factors on results and outcomes. The key is to enable internal customers to think what external customers think, feel what they feel, and be able to design the program accordingly to accommodate their needs. In the NIC example, it requires the marketing director to first consider what input is needed (who should be involved, for how long, and at what costs), how the 60 financial advisors will react to the CRMNow! system, and what the financial advisors need to learn to be successful with the CRM. This step focuses on making sure that the marketing program will be relevant, be important to the parties involved, and have adequate resources and support from the stakeholders to succeed.

Step 5. Make It Stick: Design for Action and Impact

The design thinking principle applied here is “a culture that fosters exploration and experimentation,” and the ISPI standard is “Implement Solutions.” In this process, marketers must follow through on the initial plans but, at the same time, be willing to adapt and update the plan with new information collected from customers. We need to explore what works and does not work by quickly moving forward with an iterative process of testing, learning, and validating. Essentially, this is transferring customers’ attitudes and knowledge into action and business impact. During the process, we need to collect data, address enablers and barriers, and make sure the marketing program is operating smoothly. If data show that our marketing program is not making adequate progress, we should be willing to go back to previous steps and examine input-, reaction-, and learning-level indicators with newly acquired information about customers’ actions. We also need to develop, test, and revise tools to measure, drive, and influence the success at the action and impact levels.

Phase 3. Analyze Data

This phase deals with analyzing data to build the credibility of our marketing programs. The design thinking principle for the steps in this phase is implement “a fixed process and a tool kit,” which are the steps of the ROI Methodology. The ISPI standard is “Evaluate Results and Impact.” Making it credible involves several steps including a critical but often overlooked step of isolating the effects of the marketing program. Isolating and pinpointing the amount of improvement directly related to the marketing program leads to increased accuracy and credibility of the ROI calculations. Chapter 8 provides more detail on this critical issue. The next step involves converting data to monetary values. Some measures are not converted to money and are left as intangible benefits. Chapter 9 provides more detail on these important issues. An important part of the ROI equation is the program costs. The final two steps in the analysis focus on the costs and the actual ROI calculation. More details on costs and ROI are presented in Chapter 10.

Step 6: Make It Credible: Isolate the Effects of the Program

An often overlooked issue in evaluation is the process of isolating the effects of the program. In this step, specific strategies are explored to determine the amount of outcome performance directly related to the project. This step is essential because many factors can influence sales and marketing data. The specific strategies of this step pinpoint the amount of improvement directly related to the marketing program, resulting in increased accuracy and credibility of ROI calculations. The following techniques have been used by program evaluators to tackle this important issue:

•   Control group analysis

•   Trend line analysis

•   Mathematical modeling

•   Participant estimates

•   Manager or significant other estimates

•   Senior management estimates

•   Experts’ input

•   Customer input

Collectively, these techniques provide a comprehensive set of tools to handle the important and critical issue of isolating the effects of the marketing program.

Step 7: Make It Credible: Convert Data to Monetary Value

To calculate the return on investment, impact data are converted to monetary values and compared with program costs. This requires a value be placed on each unit of impact data connected with the program. Many techniques are available to convert data to monetary values. The specific technique selected depends on the type of data and the situation. The techniques include:

•   Use the value add of output data as standard values.

•   Use the cost of quality as a standard value.

•   Convert time savings to wage and employee benefits (standard value).

•   Calculate the value using an analysis of historical costs.

•   Use internal and external experts to provide value.

•   Search external databases for the value.

•   Use participant estimates.

•   Use manager estimates.

•   Locate soft measures mathematically linked to easy-to-value measures.

This step in the ROI model is absolutely necessary to determine the monetary benefits of a program. The process is challenging, particularly with soft data, but can be methodically accomplished using one or more of these strategies.

Step 8: Make It Credible: Identify Intangible Measures

In addition to tangible, monetary benefits, the intangible benefits—those not converted to money—are identified for most programs. Intangible benefits include items such as:

•   Enhanced brand reputation

•   Improved organizational image

•   Less team stress

•   Increased customer engagement

•   Improved quality of life

•   Increased brand awareness

•   Improved networking

•   Enhanced patient satisfaction

•   Improved service

•   Fewer complaints

•   Reduced conflicts

During data analysis, every attempt is made to convert all data to monetary values. All hard data—such as output, quality, and time—are converted to monetary values. The conversion of soft data is also attempted for each data item. However, if the process used for conversion is too subjective or inaccurate, and the resulting values lose credibility in the process, then the data are listed as intangible benefits with the appropriate explanation. For some programs such as green marketing, intangible, nonmonetary benefits are extremely valuable and often carry as much influence as the hard data items.

Step 9: Make It Credible: Capture Costs of Program

An important part of the ROI equation is the denominator, the calculation of marketing program costs. Tabulating the costs involves monitoring or developing all the related costs of the program targeted for the ROI calculation. Among the cost components to be included are:

•   Initial analysis costs

•   Cost to design and develop the program

•   Cost of program materials

•   Costs for the program team

•   Cost of the facilities for the program, if applicable

•   Travel, lodging, and meal costs for the customers and sales team members

•   Sales team salaries (including employee benefits), if appropriate

•   Facilitator costs, if appropriate

•   Administrative and overhead costs, allocated in some convenient way

•   Evaluation costs

The conservative approach is to include all these costs so the total is fully loaded.

Step 10: Make It Credible: Calculate Return on Investment

The return on investment is calculated using the marketing program benefits and costs. The benefit-cost ratio (BCR) is calculated as the program benefits divided by the program costs. In formula form, it is

The return on investment is based on the net program benefits divided by program costs. The net benefits are calculated as the program benefits minus the program costs. In formula form, the ROI becomes

This is the same basic formula used in evaluating other investments, in which the ROI is traditionally reported as earnings divided by investment.

Phase 4. Optimize Results

The last and fourth phase of the ROI Methodology is reporting and optimizing results, with two critical steps: communicating results and making improvements. The reporting step involves developing appropriate information in impact studies and other brief reports and telling a powerful story to all stakeholders. Chapter 11 provides more details. The improvement step focuses on continuous improvement, optimization, and the process of using the results to increase funding for marketing programs in the future. Chapter 12 provides more details on performance improvement and optimization.

Step 11. Tell the Story: Communicate Results to Key Stakeholders

In this step, the design thinking principle is “a storytelling process to inspire senior executives,” and the ISPI standard is “Work in Partnership with Clients and Stakeholders.” Marketing programs do not end when we have results in hand. Marketers must communicate to all stakeholders and let them know the success of the program. Even when the results are not ideal, marketers still need to communicate to stakeholders, using the data to show what needs to improve and what actions are needed to improve it. Storytelling is a powerful tool. It will be even more powerful when we are able to tell the story with data collected at different levels. The story will be more interesting and compelling to stakeholders when we are addressing their concerns associated with performance issues and showing how our marketing programs can help them achieve the goals they care about. We will be able to inspire senior executives and other key stakeholders to support marketing when we back up the story with proof and a chain of evidence that our program has made a difference and contributes to organizational success. We devote Chapter 11 to this critical step in the ROI process.

Step 12. Optimize Results: Use Performance Improvement to Increase Funding

The design principle used here is “a new competitive logic of business strategy,” and the ISPI standard is “Add Value.” The key here is to make sure that marketing programs are properly and continuously supported and funded. We need to use the performance improvement approach to analyze the results, continuously seek new value-adding opportunities, and improve and sustain performance in order to secure and increase funding. This should be done regularly regardless of whether improvements are made. It is a mandate when there is a lack of improvement. When a failure is identified, marketers can use the systematic approach of performance improvement to analyze the causes of this failure and design appropriate solutions to address them. Even with success, improvements are made to make marketing programs deliver even more value. The ultimate goals are to improve value, optimize the ROI, and secure allocation of more funds as we build the case for more investment. It is a novel way to integrate design thinking and performance improvement with the ROI Methodology. We design for the needed results, capture data to tell a compelling story, use data to improve the program and optimize ROI, and then make the case for more funding. We focus on these issues in Chapter 12.

Operating Standards and Philosophy

The ROI Methodology has been routinely used by thousands of organizations worldwide over the past 25 years. To ensure consistency across projects conducted in different industries and by different individuals, operating standards must be applied to develop ROI studies. We have developed 12 Guiding Principles, shown in Box 2.3, to detail how steps and issues of the process will be handled in a consistent and credible manner.⁵ The 12 principles also provide a much-needed conservative approach to the analysis, which helps build credibility and secure buy-in and support from the target audience. We will discuss these guiding principles in subsequent chapters, as they are critical to all aspects of the ROI Methodology in marketing.