Know-How Exchange : Research/Metrics

The official definition of Return on Investment is the expected net contribution of your proposed campaign divided by the cost of your campaign. So if your campaign costs $ 1 M and you increase sales by $10M at a unit contribution of 50%, your ROI is

($5M - $1M)/ $1M = 400%

Besides knowing the cost of your campaign, this requires you to make a statement about the expected revenues generated by your campaign. If you do not have any historical data, an educated guess is a good start. Think through the purchase funnel: how much is your campaign going to increase awareness and interest for the brand, and how much of that is going to translate into a sale? For instance, we know from academic research across hundreds of products that the typical advertising elasticity is about 0.05 for mature brands. In other words, if you double the advertising budget (+100%), sales increase with 5%. Anyone who aims to convince me that their campaign is going to do a lot better, will have to demonstrate why it is so superior in terms of message, targeting, execution or media integration.

Of course, I do not know what your potential employer means by ROI: very often, companies simply use it to indicate 'lift'; i.e. by how much will sales increase thanks to the campaign (without considering net contribution margin and costs). I suggest you figure this out before the presentation!

Good luck

Dear Fox

I think that you will find that a perceptual map is more of a visualisation than a metric. Sure, It needs measurements to build one, but the aim of the map is to define the areas of product appeal from an Ansoff Matrix or any similar structure which can portray the likelihood of certain groups of customers liking or wanting a product which has a certain feature set which are measured on the axis of the matrix.

Wikipedia has a neat description of the Perceptual map on https://en.wikipedia.org/wiki/Perceptual_mapping

As these maps can be based on loose market research or can even be judgemental or subjective (No numbers, just your insights and your interpretation of those insight as to the desirability of a particular product specification) it is not a good example of the use of metrics which, if you are in any doubt, usually means statistics or measured numerical analysis.

Koen’s description of ROI is a good one but he is absolutely correct in saying that companies and managers have their own pet descriptions, so it is best to get their definition of ROI before committing yourself to a given presentation.

If you take as your metric the statistics needed to measure the performance of a marketing campaign and therefore to measure the ROI, you can’t go far wrong. Those estatistcs are the cost of a campaign, the enquiries or hits it generates and the subsequent uplift in turnover for the products or services you have done the marketing on.

You might therefore use the enquiries, quotes and orders which can be directly attributed to a marketing activity or over a period of time, the increase in sales and the associated margin you observe, all other things being equal.

That is more difficult in a retail environment as shoppers do not always respond in a measurable manner before the purchase, unless you are driving them to a specific web page in order to take advantage of an offer.

If the sales are in a shop and there is no incentive which allows you to link a sale to a particular offer, you need to look at sales uplift, and be aware that other marketing initiatives, should you engage in simulations marketing events, would also be expected to contribute to an uplift.

Accurate measurement of ROI, rather than the interpolation mentioned above, requires you to identify those who are responding to a campaign by, for example, ringing a unique number, quoting a special offer code or visiting a unique landing page.

Sorry about the wordiness, but there isn’t a short and succinct answer to this one!

Best wishes

Steve Alker
Xspirt