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.

by Angela Sinickas, president of Sinickas Communications, Inc

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:

1. 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).
2. 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.
3. 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.
4. 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.

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.

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