As we discussed in last weeks post, Part One: Should You Measure ROO and ROI Separately?, there are a lot of reasons to separate ROO and ROI measurement. One can argue that ROO measures how well Marketing achieved its goals, while ROI measures how well Sales leveraged the investment.
ROI was originally developed as a tool for comparing investment opportunities to determine which were worth funding. It is used in marketing as a way of comparing the effectiveness of various media campaigns.
Note that measuring event ROI puts the event on the same footing as other marketing investments – which can be a very good or a very bad thing…
Measuring ROI is based on identifying one or more specific outcomes.
The traditional ROI formula is:
ROI = (Gain from Investment – Cost of Investment)
Cost of Investment
The two variables, Gain and Cost clearly demonstrate the challenge of making this calculation.
- The Cost of producing an event goes well beyond the direct production and onsite expenses – there is usually an enormous investment in product and content development, as well as onsite staffing and support.
- How much of this is actually assigned to the event directly impacts the potential profitability (Gain) of the event.
Calculating Gain demands consensus.
To get a useful company wide measurement, the stakeholders have to agree on how Gain is to be measured. One best practice is to treat Gain as a modified SMART objective:
- Specific – the stakeholders have to agree on the desired financial outcome
- Measurable –there has to be a (existing) way to track the outcome
- Attainable – the goal has to reflect the capabilities of the organization
- Relevant – the measurement reported has to matter to the entire organization
- Time-bound – the measurement has to be realistically attributed to the event
Customer events can be pipeline accelerators and/or pipeline feeders
Many companies use events as a sales (or pipeline) accelerator. In this model, account executives (AE) bring customers who are already active in the pipeline (being pursued) to the event. The availability of a wide range of resources in a branded environment, together with a lock on the customer’s schedule makes it possible for the AE to close the deal faster.
The challenge comes with how to measure the impact of the event on a deal that is already in progress. If the deal closes on time (i.e. as projected in CRM) how did the event accelerate the sale? (S specific)
The other use of events is as pipeline feeders. The primary intent of the event is to create demand. The classic example is the product launch or dealer meeting, but there are many other formats for product showcases. (A attainable)
This type of impact can be easier to measure. If a customer attended the event, then bought ten widgets that were introduced at the event, it stands to reason that the event contributed to the sale.
The challenge comes with calculating how much of the sale should be attributed to the event. In addition, unless you can track sales by attendee, there is no way to measure the outcome. (M measurable)
The more difficult question is how long after everyone returns home does the event have an impact. The issue here is how many other marketing and sales stimuli the attendee is exposed to after the event. (T time)
When the event is the tip of a coordinated launch, some percentage of the sale has to be attributed to other influences. The longer the campaign runs, the less likely it is that the event can claim sole credit. In this type of situation it may make sense to simply consider the event in as another campaign cost, then look at the entire Cost versus Gain. (R relevant)
Of course real life is rarely that simple. Many events do both – so it is entirely possible that someone who attends “to be closed” will leave having seen new products and will then re-enter the pipeline. The only way that most companies can track this is CRM, which was developed to be a sales forecasting tool – and is generally maintained by Sales, not Marketing.
Are you measuring both ROO and ROI? What are the biggest challenges you are facing? What is working?
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