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Will the Real ROI in Content Please Stand Up

Editor’s note: Given that ROI remains a most frequently asked topic in the industry, we updated this original Chief Content Officer piece from a few years ago to help you answer the ROI question today.

Marketing measurement and ROI. Heard of them? Yeah, I thought so. It’s kind of a thing right now.

Without fail the most common question I get at workshops or advisory days with clients is “how are we going to show return on a content marketing investment?”

That is the exact right question because content marketing is an investment – a strategic asset that builds value over time. But we usually answer the question by using classic expense measurements for marketing and advertising. And, while there are opportunities to optimize expenses using content marketing, it can be a limiting and frustrating way to calculate the overall content marketing ROI.

Let me explain.

We always sucked at measuring marketing

Marketing performance measurement is not a new challenge. It’s not as if we suddenly lost capability that we had in the 1960s when the Don Drapers of Madison Avenue roamed the Earth. Marketers have been talking about the struggle to measure performance for as long as the practice has been around. Mercantilist John Wannamaker was made famous by a quote he never said in the late 1800s, “I know half my advertising is wasted; the trouble is I don’t know which half.”

Consider the last line from a 1964 article, The Concept of the Marketing Mix, by Neil Borden, then-professor emeritus of marketing and advertising at Harvard Business School. He was discussing the highly desired but unfulfilled quest for the science of marketing:

We hope for a gradual formulation of clearly defined and helpful marketing laws. Until then, and even then, marketing and the building of marketing mixes will largely lie in the realm of art.

I appreciate the “and even then” part. I suspect the professor knew that finding the “laws” would be a frustrating journey.

Skip ahead almost 25 years and consider a comment in the book Marketing Performance Assessment from 1988:

The assessment of marketing performance, often called marketing productivity analysis, remains a seductive but elusive concept for scholars and practitioners alike. It is elusive because for as long as marketers have practiced their craft they have looked unsuccessfully for clear, present, and reliable signals of performance by which marketing merit could be judged.

In other words, throughout the last 100 years, marketers have had this compelling need to tilt the scales from art toward science. We have longed for business laws that, if obeyed, would guarantee success. In the inimitable and wise words of the Spice Girls, “What we want, what we really, really want is the unbreakable algorithm for marketing.” And the truth is, we never get there.

Now, the introduction of marketing as a “return on an investment” is a new development. The term became widespread during the late 1990s and early 2000s, as digital technologies began to provide more granular analysis of marketing-related transactions. And whether called ROI (return on investment), ROMI (return on marketing investment), or even ROC (return on customer – thank you Dr. Martha Rogers and Don Peppers), the goal is the same:

Maximize the efficiency on each marketing expense.

This goal is the perfect measure of marketing and advertising campaigns, but it is a disconnect. Maximizing the efficiency of an expense isn’t a return on an investment. Marketing and advertising campaigns are an expense, not an investment.

#Marketing campaigns are an expense, not an investment, says @Robert_Rose. Click To Tweet

As marketers, we must show that they are necessary expenses, and we can (and should) apply our skills to optimize the efficiency of the expense in time. However, maximizing ROI has been, and always will be, a suboptimal method for measuring for campaign-oriented marketing and advertising. Let’s look at why.

Marketing, what is it good for?

Why is ROI the wrong metric for campaign-oriented marketing and advertising? First, let’s look at the definition of return on investment. At its simplest, it is the measurement of the amount of return on an investment asset relative to the asset’s cost. In fact, the calculation looks like this:

ROI = (current value of investment – cost of investment) / cost of investment

#ROI is the wrong metric for campaign-oriented #marketing and advertising, says @Robert_Rose. Click To Tweet

Let’s say I buy a house in January for $500,000 and over the course of six months I spend $100,000 on renovations. By December, because of a hot housing market and my upgrades, the house value is estimated at $900,000. In December, my ROI would be 50%:

($900,000 – $600,000) / $600,000 = 50% ROI

That investment did quite well by December. In June during the middle of my renovations, my ROI would have been negative:

($500,000 – $550,000) / $600,000 = -8.3% ROI

In June I was losing money. But I continued to invest because I was confident in the future return on the asset.

Thinking of marketing and advertising initiatives as an investment is a bit like thinking about how a tank of gasoline provides a return on the investment in your career. It’s that first part of the equation that makes it difficult. The current value is harder to measure over time, and the cost of investment might fluctuate wildly, making the investment in time unproductive. In other words, if we measure our gasoline investment one week, it might be highly unprofitable because gas prices are so high. But that might be the week when the fact that you got to work on time provided you the ability to meet with the impatient client who ultimately spent millions.

A tank of gasoline, like most marketing tactics, is better measured as an expense in time, not an investment that grows in value over time. Each marketing and advertising campaign is a new expense in your transportation strategy, a short-term expense where you can evaluate the one-time financial efficiency of that effort. You can measure the cost of gasoline, car payment, maintenance, etc. And if you stack together enough of those activities, you can justify owning a car as a means of getting to work.

Campaign-focused marketing and advertising are the recognized short-term expense of improving the performance of the business. In fact, interesting research claims that it might well be the “waste” that John Wannamaker discussed that provides the most value.

This is why there are so many caveats when you see articles and people talking about ROI in campaign-focused marketing and advertising. We must apply why some loss-leading campaigns are good for business. We must address the lag time a campaign may take to show results. There is the attribution challenge, where combinations of campaigns are what provide the results. And there are, most notably, the forgotten long-term effects of brand building.

Just as we might measure our investment in “gasoline” as a proactive measure of the value of transportation, ROI could be a productive way to measure the practice of “marketing” as an asset to the business over time. But using it to measure the incremental value of any singular campaign vs. another is almost always a frustrating and caveat-filled experience.

This brings us to the challenge of answering the ROI question for content marketing using the classic metrics of marketing and advertising. If a strategic content marketing initiative truly is an investment that should be measured by its return over time, it must be measured exactly as such.

Think about an asset, not a campaign

Take a different approach to content marketing from the beginning. As discussed, a traditional marketing campaign is a project – the success/efficiency of which is measured once it is complete.

But content marketing done successfully is a fundamentally different model. Now, it may support short-term metrics of campaign-based marketing and advertising, but it is measured against a longer-term investment model as an asset to the business.

Measure #contentmarketing as an asset to the business, says @Robert_Rose. Click To Tweet

Let’s think about some content marketing initiatives. As you build a business case for a content-driven experience, you hypothesize potential goals:

  • What’s the value of the audience on Day 100 when subscribers have grown to 1,000 and their data drives down advertising media costs by 5% but no new customers have been generated? What’s the value on Day 365 when subscribers are at 10,000, new customers are being created, and paid media costs are down by 20%? Check out how Kraft measured ROI on its online recipes database.
  • What is the value of the blog/digital magazine/hub when it provides one incremental lead per month with no additional marketing spend? What’s the value when it provides 20 leads? How about when it becomes 32% of our new business? See how Frontline Software built original research as a strategic operation for the company.
  • What is the value of the content marketing platform if the customers engaging with it have an increased average sales price of 15% over time because it establishes the company as a differentiated brand?
  • What is the value of the content marketing platform on Day 365 when it sees a few hundred-thousand page views, and generates thousands of opportunities on the site? What’s the value at the end of Year 2 when it drives 48,000 new leads, is 22% of organic traffic, and creates a $3 million efficiency on paid advertising spend? See why Monster went all-in on its career advice center.
  • What is the value of the content marketing platform if it does every one of these things but takes five years to get there?

As a business manager, you have two fundamental ways to make the company more valuable – financial and strategic. Campaign-based marketing and advertising is almost always focused on creating financial value. This is the stuff of sales growth, profit margins, increased revenue, and marketing spend efficiency. The more you use creativity, technology, and process to help optimize these activities the more value you create.

Strategic value, on the other hand, doesn’t include but greatly influences financial metrics. Strategic value is the multiplier that gives a differentiated (or easier) way to achieve financial value. When creating strategic value, you almost always incorporate how an asset in the business – product, service, or brand position in the marketplace – provides a multiplier effect.

Marketing campaigns are a cost that provide value at a moment in time. The content marketing opportunity, and why it should be measured using ROI, is an asset-focused investment that if done well provides increasing value over time.

#Contentmarketing, if done well, is an asset-focused investment that provides value over time. @robert_rose Click To Tweet

Don’t cross the streams

To be clear, delivering value and developing a smart business case for both campaign-focused and content marketing-focused initiatives are the responsibility of today’s modern marketer. But to measure marketing initiatives effectively, you must know what you’re solving for. If your thought leadership asset (e.g., white paper) is simply a supporting creative asset in a direct-marketing or advertising model, then measure it as such. It is one shot of super premium gasoline that might improve the drive to work.

But if that white paper is also (or only) added to the library of your content marketing platform, it should be measured accordingly. Measure the efficacy of the white paper, perhaps, based on the number of subscribers (or leads) it helped generate. This is the better ride to work. But the ROI of your content marketing initiative is measured by the increasing value of the platform over time, and that white paper is another incremental investment in that value.

This thinking changes the conversation about measuring content marketing. You still will answer the question about showing value, but the answers will be based on a different premise. One is based on your ability to look simply at how each individual asset is an expense that helps to meet short-term business objectives in time. The other is based on your ability to treat the content platform – and the audience it creates – as a long-term asset that builds increasing value over time.

Hear CMI Chief Strategy Advisor Robert Rose in person on the main stage at Content Marketing World. Register by May 31 for early-bird savings. And use code CMIBLOG100 to save another $100. Want to make the business case to attend? Check out this page and download the justify-your-trip letter template.

Cover image by Joseph Kalinowski/Content Marketing Institute