This episode runs 30 min. 13 sec.
David and Josh discuss the “dreaded” three letters for marketers: ROI. Why is this concept scary to marketers and what can we do about it?
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Mentioned in This Episode 130: ROI
- ROI: What is it?
- “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” —John Wanamaker
- Marketers aren’t measuring all that they can
- Some marketers are measuring, but aren’t using the data to evolve
- You and your leaders must first agree on what to measure
- First establish a vision, what does success look like?
- Suggestions on items to measure
- Measure marketing for talent (recruiting) and marketing for clients
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Josh: Hello, and welcome to PSM Show, the podcast for AEC Marketers. I’m Josh miles, and I’m joined today by my co-host, David Lecours. Today we are talking about ROI, and maybe I wanted to torture all of our listeners today, including the two of us. But I’m actually excited to talk a little bit about the dreaded three letters for marketers R-O-I. David, are you feeling a little dread today?
David: I am. I don’t know why this topic makes me nervous. I guess we’ll unpack that. You can play therapist for me.
Josh: Well, luckily, our listeners can’t see our sweaty palms over the microphones. With that in mind, I’d like to also recognize our title sponsor, who we’re so thankful for, SMPs, who is all about business transformed through marketing leadership, and more on ROI after this insert super. All right David, we are going to do this today, we’re going to unpack, ROI. Maybe a good place to start, maybe you can tell our listeners what that stands for.
David: I think it stands for return on investment. Is that right?
Josh: I think that is correct. I was hopeful that you might make something up that was like-
David: I know, I was thinking about it, but then I was like, oh, it might go sideways. I played it straight.
Josh: Realization of introspection or roping orangutans. I’m already out of steam, I can’t-
David: See what happens, you start getting silly.
Josh: When somebody is saying, okay, marketer and then they raise an eyebrow and say-
David: Yes, they do. Don’t they?
Josh: What’s the ROI on this tactic, or what should we expect that ROI is? What do you think they’re actually asking Us?
David: Well, I think there’s some skepticism. People that don’t work in marketing, because some of marketing deals with emotion and deals with some things that aren’t necessarily implicitly measurable. There’s some cynicism about, oh, you marketers, you’re just all about that touchy feely branding and type of stuff. Sometimes it’s posed as a question of like, you need to justify why we’re going to do this. The way I want you to justify that is to tell me what kind of return on this investment. I think in its spirit, it’s not a bad thing to do. I think we should definitely use it as a filter because, look, I’ll admit, as a marketer, sometimes I get really excited about stuff. If it’s not on task, or on brand or in line with our strategic plan, it probably isn’t going to fulfill that return on investment. That seems like the motivation of why that question is asked.
Josh: Yeah, I think there’s also maybe this idea that not everybody necessarily understands marketing. One of my favorite things to say to people when things actually start working is, the secret to marketing is if you do it, it actually works. When you invest and you make the effort and you test things out and pursue the things that tested well, I think you actually see a return on that. But not everybody’s necessarily experienced in marketing, and not everybody has the same trust factor as they might in some other tactics.
Josh: So, I think what they’re really asking often is, am I wasting money on this? Am I just flushing it? Or can you give me some sort of reassurance or guarantee that we’re doing the right thing here.
David: It seems like also there’s this quest for a formula. There’s like, if we plug in X, Y, Z input, we’re going to get outcome one, two, or three. Because that’s, at least in AEC world, we’re dealing mostly with people that have a science backgrounds. Whether they’re building science or engineering, or even architecture. So, science is pretty predictable. There’s definite outcomes. Sometimes they want to apply science to marketing. I know you have a favorite quote, or an interesting quote that relates to this about, are you getting your ROI? You want to share that with our audience?
Josh: Yeah, there’s this guy named John Wanamaker. I remember hearing this quote, I think, in every job I’ve ever had in an advertising business. And then also at Purdue when I was studying advertising, I remember this being on a textbook? Maybe you’ve heard a version of this, or you’ve heard it attributed to Ben Franklin, or who knows. But the quote is, half the money I spend on advertising is wasted. The trouble is, I don’t know which half. I found this particular attribution at b2bmarketing.net. But, they listed him as a pioneer in marketing who opened one of the first and most successful department stores in the United States. Growing it to 16 whole locations, which is now today part of the Macy’s chain of stores.
Josh: But I think this is really the classic thing, is that especially prior to all the technology that we have to track things today and all the big brother tactics, you would know that when I spend money, I get a return, you’re just really not sure which things you were spending on actually helped you create that return. Have you seen that at all with your clients?
David: Yeah, it’s funny. I had always heard that quote attributed to David Ogilvy. It’s one of those quotes that I think a lot of people have said is attributable over different people. But it’s also a really interesting quote in that it’s a Rorschach test that if you share it with somebody and asked for their reaction, you get insight into really what they think about, say, marketing or advertising. On one half, if you are a pessimist, then you would say, “Gosh, darn it, half of advertising is all wasted. It’s all a waste of time.” But if you are an optimist, and probably maybe more on the marketing, you’d say, “No, no, you’re missing the point. The other half is totally worth it. It is worth it and therefore, we’re getting return.” So, it’s just an interesting quote that gives you insight into somebody’s outlook on marketing and advertising depending on which side they take or what they notice within that quote.
Josh: Yeah. I think if we get into the literal math of return on investment, it’s like, if I spend a $1 and we yield $2 in sales, then I doubled my investment. So, depending on how you want to phrase that you either had a 200% return or 50% return depending on which school of thought you’re from there. Whether you’re counting the whole or the net. But the point is, if every time you give me $1, I hand you back $100, you won’t be able to hand me dollars fast enough. We’re going to create the system to where you know that that investment is returning big money and it doesn’t matter to you that 50 cents of that really got wasted, and 50 cents of that yielded 100 bucks. You’re going to be really excited that you got the $100 and you don’t really care just how effective it was.
Josh: Now, when you’re handing me $1 and I give you back a buck 50, or a $1.25, you might start to wonder, is this the best use of my money? I think that’s totally fair as well. I guess the bottom line is in so many things historically, and even today, it is really hard to put your fingers on exactly what’s working and what’s not. Even though that quote was attributed to a paid advertising spend, it really, I think, applies to things like branding, and applies to things like marketing, applies to things like video and website. I think there’s two versions of this problem though.
Josh: There’s the problem of it’s hard to know what’s working. But there’s also the real problem is they’re probably just as many marketers or firms or principles out there who just aren’t trying to measure much of anything. And then there are those who have maybe some tracking mechanisms in place, and they’re just not looking at them. What do you think is more prevalent in our industry with AEC?
David: I think, probably the lack of trying to measure. I get why it’s difficult because in AEC, we’re talking about a long sales cycle and there are so many different things that will affect the eventual sale. It becomes difficult to tie the final sale to a specific marketing initiative. You don’t know that you won the project, and the client probably can’t even tell you if they saw an ad that you posted a year ago, or if it was the conversation they had with your business developer on the golf course, or it was the incredible presentation interview, or it was the follow up slide deck that you gave them.
David: I guess my point to all that is, yes, you can’t tie it to one specific initiative. Maybe you’d be better off by trying to tie it to all of that and looking at maybe more of your total average marketing and promotional push for that particular initiative rather than trying to align it with one particular channel of marketing. Because, yeah, it becomes very difficult to attach return on investment to one specific thing. Maybe lumping or clustering things together is a better way to start to look at this.
Josh: Yeah. I think there may be two things that go into account for that. I’m going to get really geeky for like 30 seconds. But there are two things that create that challenge for measuring the one off. One of them, I believe is called the recency bias, which is the most recent thing that you heard, or the most recent touch that you had, or the email or the referral, you don’t remember the 20 other things that made you think of that brand or made you think of that firm or made you think of that business developer. It’s that very, very last thing is the thing that you attribute in your mind as the reason that you made that purchase or you decided to move forward with that partnership.
Josh: I remember as a young man being in the market for an engagement ring for my would be bride. We were at the Shane Company, which is a big national chain, I’m not sure you’re familiar with that out in San Diego. But they were famous for their very dull and boring sounding founder on the radio. Mostly what they ran was radio spots other they had some locator billboards and they’d do some print ads. But when I was in the store, being an advertising guy, they had a survey for me. They’re like, “Do you mind if we ask you a few questions about how you heard about us?” I’m like, “Oh no, that’s fine.” They went through the list. They said, “Which of the following do you remember impacting your awareness of Shane Company?” One of the last things on the list was their TV commercials. I said, “You know what, I didn’t even realize you guys were on TV.” They said, “Well, that’s the funny thing because most people select that as the thing they remember. We haven’t ever run a TV spot.”
David: Interesting.
Josh: I think since then they have made a foray into television and lots of other digital media as well. But it was kind of a funny thing. It was almost like the marketing department decided to say, “Look, this ROI thing is totally bogus, and people are going to answer with the fake response. It’s not even a thing that we do. And that’s what people think.” But related to that is this thing called last touch attribution, which is the thing I was talking about a second ago, which is things like Google Analytics or other digital tools, it’s easy for you to get a false positive of the thing that you think is really driving the traffic. Which maybe it’s just the loudest or the most recent thing that somebody saw.
Josh: All of these go into effect of like you were saying, David, maybe it’s more important to look at these as an overall campaign or an overall effort where it gets really difficult to track the ROI of running a print ad or having a banner ad or sending a weekly email.
David: Yeah, not to be disrespectful of your CFO, but at the end of the day, if you’re spending let’s say, $200,000 a year on your marketing and you’re winning $4 million worth of projects, do we need to track every last little ad that you ran? I guess it is what we were talking about before, if the results are there, and we’re getting them, I’m not sure that it is essential that it’d be tracked back to every single little item.
Josh: I think revenue solves many lows.
David: Certainly.
Josh: If the cash is flowing, then nobody’s probably too worried about how much you’re spending on a particular tactic. I think you’re probably more likely to see these kind of questions come up if the firm is struggling or if this is just not an area you’ve ever outlaid cash for before, and the marketing team is really pushing for a particular new strategy or a new approach? That might be where you’re going to start to see these questions about ROI?
David: Yeah. You’ve identified in some of the notes we made before the episode, some different ways and different ways of thinking about measuring that might be unexpected. Hope for you to share some of those thoughts in terms of different things that maybe our audience didn’t think of measuring. Because I think your point earlier was that yeah, we’re leaving a lot of stones unturned that we could be measuring that might give us some insight into what’s working effectively.
Josh: Well yeah. I think maybe before we dive into the list of things. Back in Episode 127, I believe, it was you and Ryan were talking on the client experience conversation. Ryan from Client Savvy about co-creating the idea with the client or with the customer about how you’re going to measure something, or what that process looks like. I think it’s the same thing with your client, or your principal or your CFO, is if you sit down together and decide, okay, here are the things we’re going to measure, and let’s decide together that these are important. And here’s what success looks like, we think. When we hit these numbers in these areas, or when we see these results, or when the bottom line is XYZ, that’s how all know we’ve actually moved the needle.
Josh: I think there are so many things that you can track, but tracking all the things doesn’t ensure that you’re going to get the success or that you’re going to have a shared idea of what success is. When you’re like, “Well, we have 100,000 followers on Twitter.” Your CFO may not be impressed with that as much as you adding one new client. Again, I think it’s important to think through what are the specific things you’re going to track that you can both attribute value to those things.
David: That co-creation exercise is really valuable. I think anybody would benefit from asking your boss, how are you being measured? The more you can understand how your boss is being measured, the more effective you can be in making them look good. If you’re making your boss look good, and let’s say it’s the CFO, you’re going to look good. And you’re going to be promoted, and you’re going to have a better case when it’s time for your performance review task for more money because you’ve potentially now quantified or at least you’ve done the things that made your boss look good.
Josh: Yeah, exactly. Back to your question, I think the list of things, and feel free to add to this, David. But some of the ones that I had noted before the show were what are the number of inbound requests? In traditional online marketing, inbound requests often means ones that you didn’t ask for, didn’t know that were coming. In our industry, I think that’s a really, really, really rare thing for an AEC firm to get a project request that there was no relationship, no former knowledge. But if you see an uptake in those blind requests, even though those are tougher to win, I think that it still tells you something, that there’s some effort going on there.
David: Right. There’s something about brand awareness that maybe if you didn’t have a relationship with the client, but now you’re seeing more of these requests, that you’re on more people’s radar, and your name is coming up. So, you’re being added to this list for the RFP. I think that’s a good thing to keep track of.
Josh: Well, it looks like-
David: It doesn’t mean you have to say go, you don’t. In fact, usually in my own internal go, no go process, if I don’t already have a relationship or know the client, I’ll still have a conversation with them. But it’s rare that we’re going to pursue that project in a big way, especially because if I start to get the feeling that they’re just lobbing RFPs out into the universe, trying to get as many people to respond as possible, that’s a surefire, like, all right, they’re just looking for a low price.
Josh: Yeah.
David: But I’m certainly flattered, and I’ll take a note of that we got that request because it tells me, “Hey, our brand name is out there and we’re getting asked, and there’s something nice about getting asked.
Josh: I think there’s, like you were saying back in Episode 129, when we were talking about awards, after you had won a few this past year, you started getting reached out to a little more cold, and had some more inbound requests. Again, there was some sort of activity going on that created that brand awareness and created some new chatter and activity. I think related to that, there’s some other things that you could be tracking. Are things like your ratio of go to know go. Meaning, out of those new requests, which ones are you pursuing? Similar to what we talked about in the awards episode as well, tracking the time and effort and money that it takes to create those proposals. That doesn’t necessarily tell you how effective your marketing is, but it is something that’s worth tracking, I think, to know, hey, we win one out of 10, but we’re spending $10,000 every time we go after one. So, should we be a little bit more selective to get that down to, we’re winning one out of three, and then that starts to make a little more sense.
Josh: I think, knowing where those numbers are, help you determine really what what’s worth going after, or maybe better yet, what’s the shortlist or the hit rate of those goes?
David: Yeah. I think that the ratio of go to no go is interesting. But yeah, it’s that ratio of go to wins that I think is a juicier number. I just think also tracking the total number of goes is valuable to know how many pursuits did we go after this year? Is that reasonable considering our manpower? Because I know wow, so many firms unfortunately from the top are under such pressure. There’s this myth that wow, the more we go after, the more we’re going to win and that’s not always the case.
Josh: Yeah. I’ve even heard from marketers at small to mid-sized firms who say, “Man, we cranked out a proposal a week or proposal twice a week.” Which is just crazy numbers in some firms. In other firms, that might be a really slow year. Again, understanding how big your team is, how big the firm is, and how big is a typical project? Is a typical project a $70 million building or is it a $2 million renovation? That makes a big difference too about what’s worthwhile and what makes sense.
David: For sure.
Josh: A few other things, there’s the traditional … I say, traditional in the past 10 years. The traditional digital marketing metrics such as website traffic; how many visitors, people are always asking how many hits? How many hits on the website? How many unique visitors you had, I think is a more helpful number. Bounce rate, which is we should probably go into super geeky web stuff at some point. But bounce rate is like when you go to the website, and you don’t click on anything else, and you either hit the back button or close the browser. So, you want that number to be lower. What’s your time on site is. If somebody stays there for 10 seconds, or 10 minutes, makes a big difference. Really, ultimately shows you engagement.
Josh: If you view multiple pages of a site and you’re on there for several minutes, you’re probably actually reading or consuming content. I think those are all really great measures-
David: Well, within that website area, I think measuring page engagement, page ranking, what are the top pages that people are going to and are they part of what you perceived to be the funnel or the sales process? If certain pages are getting a lot more traffic than you would expect. And then the ones that you want to get a lot more traffic aren’t, you need to start thinking about, hey, maybe we need to develop a campaign to drive people to the pages that we want people or maybe it’s a navigation issue. People just aren’t finding the content really easily.
David: Then of course, you have not just time on site, but time on specific pages. There are always certain pages that having a high bounce rate isn’t a bad thing. If it’s just a contact page, they get your phone number, they’ve got what they needed, they don’t need to move on. There probably won’t be a real high number in terms of time on that particular page. So, just being real clear about not setting these universal expectations, like more is always better. Knowing what you’re measuring and why.
Josh: I think there’s a couple other related digital numbers that we could look at, which is, if you have an email newsletter, how many subscribers you have, or your related social media stuff. How many average likes or followers or how many times does a particular tweet get retweeted, or how much traffic or follower traffic do you have on things like LinkedIn?
Josh: Those are again, maybe some of those feel a little fluffier if you’re sitting in the CFO seat. And some of those feel really important if you’re a marketing manager. I think again, just other things to consider.
David: Yeah, I know back in Episode 109, that you interviewed Nicole Law from TCOM, you got into some of the approaches that they’re taking, and looking at ROI specifically for marketing in terms of recruitment, recruitment of people. Maybe, if you could share again, some of the things that you guys talked about, and where our listeners should be thinking about those investments.
Josh: Yeah. First of all, if you haven’t listened to that episode, definitely go back and check out 109. But I think if you think about the cost of acquiring talent, almost like the cost of acquiring a project, what’s the cost of having to turn down a project because you don’t have enough people, or you don’t have the right people, or you don’t have enough of the right people in the rainy season? And then comparatively, what might you spend with a headhunter or with advertising online or what are other ways or costs that go into account of what it takes to hire somebody?
Josh: One of the things that Nicole talked about was the process and how to streamline that from making the initial reach out all the way through how long till they’re in the seat, and how long till they get on boarded? So, there are lots of things that you can measure inside of there. I don’t pretend to be the world’s biggest fan of the HR process. But I think looking at HR like a marketer, again, gives you some really interesting things to track. Also, to think about well, while we’re hiring for this particular role, we could also be marketing our services that correlate with that, that our prospective hires are seeing this is a real thing for us. That we’re really … To go back to the bridge design example from a couple of episodes ago, if we’re entering awards for bridges and our marketing, our work on bridges and we’re going to hire bridge designers, they feel like they’re going to be respected when they come to work there because it’s clearly something that the firm values.
David: Absolutely.
Josh: I also really like this idea of, like we said towards the top of the show of sitting down with your principles and team and determining what does success look like in this area, and what can we all agree on that, okay, when we do this, we will hit the mark? I guess I’d like to challenge our listeners to think about, there are so many things you could possibly measure. But maybe have that conversation with your team, or maybe sit down at the table with a couple of recommendations. Here are the three things that we could start measuring and start reviewing that I really think are going to be most impactful for your firm.
Josh: In your firm, it’s going to be really different than in the firm of your peers. That’s my challenge to you today is to start measuring something and don’t be quite so scared of ROI. What do you think about that, David?
David: That’s a great exercise. Sometimes these challenging conversations yield really great results. Just because it may be a little bit uncomfortable, I think having that conversation and getting everybody … Because what worked at a previous job, or maybe even what you think is working now may not be what other people in the organization value. Man, that’s going to be problematic. So, this thing that gets everybody pointing towards the same North Star rather than everybody going off and trying to find their own new constellation. That alignment is essential.
Josh: Excellent. Well, I think that about wraps up our conversation today. Again, we’d like to thank our new title sponsor SMPS You can check out smps.org, or while you’re at it, you can check out the psm.show website to see more about today’s episode and for all of our show notes. Of course, if you have any questions, comments or suggestions for future shows or guests, that’s the right place to go, psm.show and scroll down to contact us to drop us a line.
Josh: So, that’s all for today’s episode of PSM Show. From David Lecours, and myself, Josh Miles, we’ll see you next time.