The ROI of Measuring ROI

Measuring ROI has a cost. That investment either pays out or it doesn’t. To improve the ROI of measuring ROI, reduce the cost or improve the return. Simple, but it misses the point of what happens when the methods of producing ROI calculations change.

Think of it this way. If Marketing Mix Models are bought as a project the price tag could be upwards of $200,000 and the scope of work defines how many models are produced. Cost per model is known with the result being to focus on finding larger insights to justify the cost. In other words, aim that the ROI of measuring ROI is positive.

Arima’s self-directed MMM showcases ROI and projected outcomes.

Change the procurement from a project to a subscription, put it in the hands of the curious and the cost of measuring ROI can be driven down to nearly zero. No pre-determined scope of work and the curious will use it often. If the cost is nearly zero then the threshold which makes the Return valuable also drops, which dramatically expands the number of insights which can be applied to the marketing plans. Cost per model down, number of insights up yields a dramatic change in the ROI of measuring ROI.

This is why Arima moved from a project price to a subscription model for Marketing Mix Models. We wanted to create incentives for continually experimenting by pushing new hypotheses through MMM. Some cloud-based MMM providers have stuck to the established project-based business which expands their margin in the short term but doesn’t allow them to participate in new developments that integrate MMM into the media planning workflow.

Market mix models as a standalone solution provides ROI calculations on media investments. Integrated solutions asked, what does the marketer need to do with these numbers? They’re nice to look at, however, to deliver improved effectiveness, certain actions need to be taken. That happens in media planning and so MMM integrated with media planning tools are a natural fit.

Arima’s MMM seamlessly integrates with the cross-media planning tool.

Some marketers stick with a low-cost digital attribution approach to measuring ROI. The assumption is any insight generated yields a high ROI on measuring ROI because the data and reporting from the digital platforms is free. What’s missing is whether the measurement of Return is correct or misleading. Many brands using this approach find themselves over-invested in digital media, all claiming excellent (and proprietary) outcome numbers while their business suffers. In other words, the cost of calculating ROI is extremely low, but the insights are leading to enormous waste in the media budget, essentially a negative ROI on measuring ROI.

Marketers aiming to improve what they get from measurement schemes; the ROI of ROI, need to focus on the business model in which the technologies are offered. Too often the focus is on the math, the methodology, price or monstrous size of the analytics firm. Marketers who focus on the number of insights generated and the ease of application will yield greater marketing results.

Posted at MediaVillage through the Thought Leadership self-publishing platform.

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