TOP TIPS: A five-step formula for calculating communication ROI
Are you trying to calculate the return on investment of a specific communication campaign or channel? Narrowing the focus to just one project is a good start.
STEP 1: Focus on just one project
Start with the total financial value of an outcome the communication was
intended to achieve. To make this more meaningful and easier to isolate
the impact the communication had, the outcome should be very discrete
and specific. Focus on one project or initiative that contributes to a
revenue or cost control goal, rather than the entire goal, or one behavior-impacting
article in a publication or website, rather than the entire communication
channel.
STEP 2: Ask others for input
Reduce this total financial value by the percentage credit that can be
attributed to communication. This can be calculated in many different
ways depending on the situation:
- Take 100% credit if management can identify no other inputs that affected the outcome (e.g., putting in place a program that encourages employees to use a tool or medium that is cheaper than another).
- Ask management in advance: “Considering all the other organizational inputs planned to achieve the objective, what percentage do you think communication would contribute to a successful outcome?” Even an expected contribution of one % can show a large return because typical communication budgets are often small in the initial stages.
- Ask the individuals whose actions contributed to the achievement how much credit they would ascribe to the communication. For example, communicators at one financial services company ask customers in their annual readership survey which new services/products they purchased from the company because they learned about them in the customer publication.
- Conduct a “pilot and control group” study. The incremental increase in success for the pilot locations over the control groups would be communication’s contribution. Sometimes you have unintended retroactive pilot/control groups when you discover that not all elements of your campaign were implemented by local management. Track the differences in outcomes against the differences in communication inputs.
STEP 3: Do the mathematics
Multiply the figure from Step 1 with the figure from Step 2 to calculate
the proportional financial value of the outcome that could be due to communication.
Be very conservative in taking credit. Take credit for less than you think
you deserve, rather than more. If you don’t, someone in your financial
department will.
Take credit for less than you think you deserve, rather than more.
STEP 4: Include all expenses
Subtract the total cost of the communication from the figure produced
in Step 3. Be as aggressive as possible in calculating this. Include staff
costs, production costs and the money spent on any research.
STEP 5: Get results
What’s left is the net financial value of communication to your
organization, after the cost of communication. Divide this net financial
value by the total communication cost. The result is your estimated return
on investment.
© Angela Sinickas 2005. Reprinted
with permission.
Angela Sinickas is
the president of Sinickas Communications, Inc., an international consulting
firm dedicated to helping corporations achieve business results through
focused diagnostics
and practical solutions.
Other recommendations:
TOOL: The Sears Roebuck Employee-Customer-Profit
Chain model
TOP TIPS: Top five communication measurement tips