Marketing Thought

The ROI Of Customer Engagement

One of the biggest challenges in marketing and associated fields is measuring the ROI (Return On Investment) of an activity. Trying to find a meaningful number for the ROI of customer engagement is a Herculean task. Maybe they’ll be a prize at the end but you’ll have to clear out a lot of shit before you get the prize. Rachel Happe (of H&R Block) gave some advice on how you could get to such an ROI.

Quantifiable Financial Value

Happe complains that a lot of thinking about customer engagement is simplistic. I think she is right. I can certainly see the business case for H&R Block hosting a tax advice portal to promote customer engagement. It is so ‘on brand’ as to be practically the definition of what they should be doing. How though to provide a ‘quantifiable financial value’ for this activity? At this point, I started to have concerns.

The challenge is that this is really, really hard. Not Happe’s fault but she has a very limited number of words to get across the idea in her HBR piece. I see a familiar problem a lot with marketing work on metrics. She spends most of the piece telling us about the engagement actions taken and her thoughts on what is happening in the world of engagement platforms. This is genuinely interesting but if you only have a couple of pages to tell us about the ROI of customer engagement I want you to get pretty much immediately to clearly defining return and clearly defining investment.

The Return In The ROI Of Customer Engagement

ROI of Customer Engagement According to Happe (2016)

The return seems to be the value of answers and the networked value of answers. These seem to be a) the value of the direct response to a question, and b) the value of having the answer available for the future. This is useful. It is also clearer than many ROI ideas as Happe does relate the benefits to costs savings. Presumably, there are savings if H&R Block staff don’t need to field client questions because there is a self-service advice portal available.

The challenge is that this definition of return risks being both too limited and too broad.

The return is too limited if we include only cost savings. The branding advantage of the portal is lost. The firm might try to shoehorn in other benefits, e.g., increased brand value. Indeed, Happe suggests that amazing results include:

[helping] H&R Block extend its brand presence by offering trusted support and access in a way they never could before.

Happe, 2016

Yet that enhanced return isn’t in the return in the formula as far as I can see. The formula doesn’t really work as it is too narrow.

Including Value Created For The Community

If instead, we wanted to include all the value created (for customers and the firm) then this also doesn’t work. The formula doesn’t include the wider value to customers and the firm isn’t seeing that return so this value shouldn’t be directly compared to the firm’s investment to create ROI. A real problem with ROI is that the return and the investment really should relate to what is gained and lost by the entity making the decision. If, for example, a lot of value is created for customers but the firm can’t capture this value the ROI to the firm really should look low given the costs are the firms and the returns are not the firms. Maybe the firm does it as a public service? But if it is a public service and so not expected to bring a financial return to the firm then why bother doing an ROI calculation?

Such an approach would be too broad.

The Investment In The ROI Of Customer Engagement

The investment is also very hard to judge. The formula suggests the investment is the “community budget”. Presumably, this is the firm’s spend on the portal but this is really quite vague. Again this narrow definition of investment implies we really should only use returns gained by the firm given it is their investment in the community. (Happe doesn’t include the investment of time from customers searching the portal. I am fine with that but I am just pointing out the investment is narrow).

Yet much of the discussion in the article seems to talk of value to the customer which isn’t necessarily captured by the firm. I was left pretty much puzzled by what was going on. I pretty much believe everything Happe says but think the math is just not credible. To my mind, and I admit I’m overly literal at times, the formula given doesn’t seem to be useful to anyone for anything.

I really like the idea of getting to quantifiable financial values and,

I also love the idea of considering value created for the community.

This formula doesn’t really do either properly.

A lot of claims to show ROI are far too messy and vague to be credible. I’d add this one to the list.

Finally

A minor stylistic digression but can we not use the term ‘geometric’ anymore? It seems to me to be a similarly silly replacement for exponential. It is just a term business people use when they mean things are going great but really want it to sound mathy and technical when it isn’t.

For more on ROI see here and here.

Read: Rachel Happe (2016) Calculating The ROI Of Customer Engagement, Harvard Business Review, August 19

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