Monday, January 19

Measuring Communication: ROI Meets ROC


There has been considerable time and effort invested by hundreds of people in attempting to demonstrate a return on investment for communication — advertising, marketing, public relations, and social media. It began as far back as, well, since someone first realized it might be measurable. In fact, any search on the subject will turn up any number of efforts, with some providing better explanations than others.

For my own part, I've been working, on and off, to refine a measurement formula for the better part of two years. My hypothesis is simple: the return on investment is related to the intent of the communication and the outcome it produces.

I | O = ROI

However, since last year, there have been several people who have noted that ROI means something different to business. In finance, for example, ROI means the ratio of money gained or lost (realized or unrealized) on an investment relative to the amount of money invested. When considering that definition, it becomes reasonably clear that ROI might be the wrong term for communication measurement, especially because not all communication produces outcomes that yield direct returns.

While this doesn't change the hypothesis, it does place a greater emphasis on establishing the connection between direct and indirect results because if we narrow the definition to only recognize direct returns, the greater portion of any communication plan will be diminished and working professionals will continue to misidentify incidentals such as conversations outcomes. Instead, I propose the real measure of communication is exactly that — the return on communication or ROC.

[(B • I) (m+s • r)/d] / [O/(b + t + e)] = ROC

For the next several Mondays, I will be writing a series about the above formula as illustrated within a free 5-page abstract, Measure: I | O = ROC a.k.a. The ROC, which defines a revised formula for communication measurement across advertising, marketing, public relations, internal communication, and social media. It has already been proven effective in measuring individual communication and ongoing campaigns.

5 comments:

Jacob Summers on 1/19/09, 3:11 PM said...

Oooh. Social Science. I'm looking forward to this.

Damien Basile on 1/19/09, 4:19 PM said...

you are yet again on the cutting edge of communication. Someone needed to at least try to figure this out, and i'm glad it's you Rich. I will be paying close attention to what you have to say here, as it is some of the most important work we have ahead of us. Me? Currently I'm looking to gauge value. But that's a whole other subject. Can't wait.

Rich on 1/19/09, 8:27 PM said...

@Jacob. Thanks! There might be some of that. ;)

@Damien Thank you for the visit. I work with communication and social media in different ways, business included. I think there are ample opportunities to bridge any gap, assuming there is one.

Value is an excellent topic as well, provided we appreciate it's often subjective. I'll be sure to follow your thoughts on the subject.

All my best,
Rich

Scott Baradell on 1/20/09, 8:04 AM said...

Damn, Rich -- this is pretty hardcore. Don't you know PR people don't know math?

Ah, but that's your competitive advantage, my friend. Clients DO know it -- particularly as it relates to their bottom line.

I've downloaded your PDF and will be reviewing it carefully for all that I can borrow, steal and otherwise reallocate :)

Rich on 1/20/09, 2:29 PM said...

Scott,

I really appreciate it. I'd consider it an honor if you used it to benefit your clients — that is why I decided to put up for public consumption.

I believe we can make a real positive impact for our industry if we only take the time to meet business halfway.

Best,
Rich

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