“Part 2 of 3: How to Measure Investments in Communications,” by Jeff Posey

Greg Banks is a Director for Deloitte Consulting LLP. One of Greg’s career specialties is Marketing Return on Investment (MROI). I spoke with him about how we can apply MROI principles and leading practices to corporate communications.

Before you read Part 2, see Part 1: Is Communications ROI Part of Marketing ROI?

Jeff Posey: When you say MROI, what’s the I? What’s the investment? How can we identify investments in communications?

Greg Banks: It’s dollars. It’s not always obvious how to translate into dollars, but dollars are the great equalizer. Dollars are the way you put a value on effort and resources, and, handy for us, dollars are also the way to measure return to the company.

One of the important techniques is that you need a way to standardize dollars so you can compare. Some communications you may pay for in labor costs, on a bi-weekly basis; some you may pay for in material production, on an annual basis. We should standardize to get these both on, say, a weekly unit of time, so we can compare them.

JP: So you’re looking for magnitudes of difference in investment activities that affects the return in dollars?

GB: Yes. If your communication is big enough to make a change for your company, then don’t get hung up on precision. Figure out the dollars you invest in the communication and accept some tolerance in your definition.

Don’t invest inordinate time trying to capture every detail and every original thought by your communications team.

Here’s an example: For a project I was once involved in for a large company, we wanted to improve the marketing investment. We spent a lot of effort upfront to calculate the cost to generate a new sale.

Then we went back into the marketplace, and altered our plans based on our understanding of cost-per-sale. We made a lot more sales for the same investment. And we learned as an organization how to change.

Were we precise? No, not at that point. For this company, the value of a sale varied widely. Some sales generated $100 in profit, some generated $500. We knew this in concept, but we didn’t want to tackle this topic until after we got some marketplace experience. By the time we were on our third cycle, we evolved our measurement from cost-per-sale to NPV [net present value, a measure of profit]. And we kept growing, and kept learning.

If we’d tried to leap all the way to NPV in the first cycle, we might have bogged down and never gone back into the marketplace.

I’m sure there are parallels when trying to improve the return on communications efforts.

JP: Good enough is good enough.

GB: Yes, that’s right. MROI is more about the change than it is about the analysis. That’s a common misperception. It’s the same kind of thing we’ve seen with technology. It’s not about the technology, it’s what you do with it. It’s not about the analysis, it’s about making different, better decisions, or having validation of your decisions. I call it a “relentless improvement” approach – where you can get better over multiple periods of time.

The analysis itself is important, sometimes even awe-striking in what we can figure out. But if you come into it with analysis as your orientation, you can invest a lot of time and money and never earn a dollar in return.

JP: If I were trying to identify an analytical approach in a corporate communications environment, how would I start?

Before that question, ask yourself: What’s your goal? Can you link it to something that has a financial value to the company?

JP: So I started trying to analyze before I even figured out what I’m trying to change.

GB: You almost fell into that trap we were talking about. You were too focused on the details of the analysis, of how you calculate it. That’s just a means to an end.

Think about what you’re trying to accomplish as a corporate communicator. If you, for example, influence a group of employees, what actions do you expect them to take? How does that lead to more revenue or lower costs? That’s the kind of thought process I’d recommend.

You don’t have to be a purist. All things don’t have to fit into a sophisticated statistical model. Think of it this way: Most other disciplines are trying to generate some financial gain for the company. Communications should have that orientation as well.

Next week, see Part 3 of 3: Communications ROI can Compete in the Internal Free Market

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