Why ROI Is The WRONG Way To Measure Your Product’s Marketing Program

by drjim on November 18, 2009

Marketing Programs Require More Important Things Than Just Money To Be Measured

Marketing Programs Require More Important Things Than Just Money To Be Measured

Ah the world of product marketing — it’s where artists dream up brightly colored logos and put together viral YouTube videos that nobody really understands but everyone has to watch and send to their friends. Well, as a product manager you may think that that is what goes on in the world of marketing, but in the end you really don’t care. What you want is results, in other words more sales of your product. Let’s reign in the magic unicorns that live in marketing and try to come up with a way to measure what we’re getting for what we’re spending. Maybe ROI is the way to go…

Everything Is Easier On The Web

Surprise, surprise! In the past few years everyone has fallen in love with marketing / pushing their products on the web. Forget newspapers, magazines, radio, and TV — the web is where it’s at. One of the big reasons that everyone’s in love with the web (besides the fact that it’s all new and shiny) is that it seems to offer a fantastic return on investment (ROI) .

In a nutshell, what everyone believes is that when you use the web to reach out and contact your customers and potential customers, it costs you next to nothing. In turn, if anyone happens to buy your product because you got in touch with them over the web then ta-da you’ve just “found” money.

The problem with all of this comes when we start to take a closer look at just what we really mean by getting “results” from a web-only based campaign. If we dumb things down and just use some measure of ROI as a way to gauge how we are doing, we may be missing some important information.

It’s All About Relationships

How about if we take a collective step back here for just a minute. Whenever you do marketing for your product, what’s your goal? Deep down what are you really trying to accomplish? The real role of marketing is to generate leads which is just a fancy term for “find people who have a problem that might be solved by your product”.

Just telling people about your product once is often not enough. In many cases you actually have to change people’s behavior before they will become a lead for your product. Getting people to change their behaviors and become a lead is what the real objective of your marketing efforts are. How well you are meeting these objectives is what you really need to be measuring. Maybe calling it “return on objective” (ROO) is what we should be doing.

An Example Of An ROO

David Shoenfeld is a VP at the U.S. Postal Service and he knows a thing or two about balancing web marketing with other channels. As an example of an ROO for product marketing he talks about the product managers who worked for a hospital in Kentucky.

Hospital product mangers, you say? Why not — a hospital is actually a collection of very specialized products that get sold to customers and so product managers are needed to play a key roll in managing and marketing those products.

This particular hospital wanted to get more referrals from doctors (“go have your surgery at this hospital”) because there’s a lot of money in them thar referrals. The product managers initially did what we all would do right off the bat: they sent out an email blast to all of the local doctors asking for more referrals. Nothing happened.

A little research revealed the flaw in their plan: in order to get more doctors to refer their patients to the hospital really required a deeper relationship between the doctor — hospital — patient. This meant that to get the results that they were looking for the product managers had to roll out a multi-channel marketing campaign. This included direct mail, TV ads, and even sponsoring some health lectures in the community.

What All Of This Means For You

I know that you’ve heard this before, but in my opinion you just can’t hear it enough: before you start any marketing program for your product, you need to make sure that you are very clear on the objectives of what you are hoping to accomplish.

Yes, money is important. However, since what you really want to do is to determine how well you are meeting your objectives, you need to be able to look beyond the dollars and see how you are doing on meeting your overall objectives.

Make sure that when you invest the time, money, and energy into your next marketing program for your product, you do it right and actually connect with your intended customers. Do this well, and your product can’t help but be successful.

What product marketing situations do you think that email is well suited for?

Click here to get automatic updates when
The Accidental Product Manager Blog is updated.

P.S.: Free subscriptions to The Accidental Product Manager Newsletter are now available. It’s your product – it’s your career. Subscribe now: Click Here!

What We’ll Be Talking About Next Time

Put yourself in the shoes of a Microsoft product manger for just a moment. You’ve got a bit of a challenge: you work for a very large and a very powerful company that has lost its cool.  Maybe opening a store would be the answer…

Be Sociable, Share!

{ 2 comments… read them below or add one }

Saeed Khan November 19, 2009 at 10:49 pm

Hi

I understand what you are trying to say, but I think you got some of the terminology confused. (Or maybe I’m confused and just don’t realize!).

While there is a formal financial definition for ROI, in the common business usage, (i.e. outside of finance discussions) ROI is about objectives. As you say, an investment can be in “time, money, and energy”. The return on that can be in dollars, awareness, adoption etc.

I don’t think ROO — Return on Objectives — is the right phrase. The “return” has to be on the input. i.e. investment. The objectives are the goal. i.e. not the input.

I can’t think of a good alternate phrase or acronym, but if you want to modify ROI, then focus on finding a replacement for the R and not the I. 🙂

e.g. something like Achieivment on Investment.

Told you I couldn’t think of a good alternate!

Reply

Dr. Jim Anderson December 10, 2009 at 3:43 pm

Saeed: So I’m with you there — the vocabulary isn’t really all that clear. I like your point though: we all have limited amounts of time and money and what we’d really like to do is to find ways to “spend” them so that we get the greatest return. For way too long marketing programs have been viewed as not being able to be measured. No matter what you call it, there has to be a way to figure out if what marketing programs you are spending your time / money on is the best for your business. Maybe what we need here is a cool sounding acronym like B-A-N-G or something like that — we can figure out what it stands for later on…!

Reply

Leave a Comment

Previous post:

Next post: