The problem with ROI

David Phillips kindly sent me a posting on the role of ROI in Marketing from Brian Carroll’s B2B Lead Generation Blog -  http://blog.startwithalead.com/weblog/2007/05/the_difference_.html – which discusses the difference between ROI and marketing accountability. As this is an issue in public relations, I have posted this comment:

Part of the problem with ROI is that a financial concept is applied to a non-financial activity. Sure, marketing and sales activity should result in financial results but the misuse of specific business language in an effort to get understanding from the Board is only piling pressure on marketers and communicators.

One of the definitions of ROI is the ratio of how much profit or cost saving is realised from an activity against its actual cost, expressed as a percentage. In reality few marketing or communication programmes can be expressed in that way because of the problems in putting a credible financial value to the results achieved. In 2004, the UK’s Institute of Public Relations said, “this (use of ROI in PR campaign) is not only confusing but misleading” when the term PR ROI is used loosely. Unless the objectives of the activity are solely to achieve a sales or financial outcome, ROI is meaningless.

For marketers, the application of ROI limits their role to sales support and ignores the brand and reputational issues. In PR, I’ve long argued that the use of business language is a fundamental sign of insecurity and a lack of confidence. It seems that marketing has the same affliction.

To read more on my views on the role of ROI in public relations, see this article on the PRism online academic journal,  http://praxis.massey.ac.nz/fileadmin/Praxis/Files/Journal_Files/Issue3/Watson.pdf