It’s Time To Start Thinking About Consumer ROI

ROI – Return on Investment – has long been a metric used by brands to measure the effectiveness of a program. Spend $500,000 and get $1,00,000 in sales and you’re doing a good job. Spend $1,000,000 and get $500,000 in sales and, well let’s just say I hope your resume is in good shape. Of course ROI can be measured in other ways as well. From a PR standpoint it may factor in some sort of ad equivalency for the earned media garnered by the program. Regardless of the specifics, ROI is something most CMOs look at when measuring how well their programs are doing.

In so many areas, Social Media has flipped traditional marketing on its head. We talk about engagement and conversations, listening and providing value,  but I’m not sure I’ve heard a lot of discussion about ROI outside of its traditional meaning. ROI is an internally focused value that doesn’t take into account the drastic changes that have taken effect in marketing over the last decade.

I think that should change. I think we should be looking at Consumer ROI (C-ROI).

What is Consumer ROI? It’s a numerical value that provides an easy to understand metric for the Return On Investment of your Consumer. Their investment is made up of several factors, including:

• Money Spent - On purchases, tech support, repairs, accessories, etc.
• Time Spent – At your store, on your website, following you on Twitter, reading manuals, viewing content, etc.
• Social Capital – What is the effect on the consumer when they display your products or recommend them to friends?

That is their investment in your brand. Their return is the enjoyment they get from your product, and more generally, from interacting with your brand, as well as the Social Capital they gain (or lose) by being associated with your product. Any number of factors could go in to Consumer ROI, with several industry specific metrics being included. A car manufacturer would have different metrics than a quick service restaurant, for example. Some examples would be:

• Time spent on the phone with customer service
• Time spent on your website trying to find contact information for customer service
• Time spent at your retail location
• Time spent consuming brand-sponsored content (video, custom publishing, website, Facebook, Twitter feed)
• Purchases made
• Time spent learning how to use products
• Time spent waiting for products to come back from the shop

These are just a few, top line ways in which a consumer is investing in your brand. These categories are neither positive or negative in and of themselves, but rather take on values based on real world efforts by the brand. 

Once these relevant factors are identified and listed you can start to create a formula for measuring C-ROI. Here’s a fictional case study using two consumer electronics companies, Blue Pomegranite (BP) and Centrifuge Labs (CL):

Let’s start with Blue Pomegranite. BP is a challenger brand that sprung to life during the dot com boom of the late-90s. They’ve dived heavily into Social Media and have fantastic customer service, but their products, while functional and inexpensive and don’t generate a lot of excitement amongst consumers. Here’s how you might calculate BP’s C-ROI:

1. Time spent on the phone with customer service: Average 10 minutes (score: +3)
2. Time spent on your website trying to find contact information for customer service: Average 1 minute (score: +5)
3. Time spent learning how to use products: Average consumer, 45 minutes (score: +4)
4. Time spent waiting for products to come back from the shop: Average consumer, 9 days (score: +6)
5. Time spent consuming brand-sponsored content (video, custom publishing, website, Facebook, Twitter feed): Average time 25 minutes per day (score: +6)
6. Time spent at your retail location: Average visit 3 minutes (score: -7)
7. Purchases made: Average per consumer, two products per year (score: -3)
8. Perceived value of products: Cheap, utilitarian, budget (-4)
9. Frequency of repairs per lifetime of product: three times (-7)

Once all the numbers are added up, you have a C-ROI score of +3

Is that good or bad? Neither is the answer. The value of your C-ROI brand score needs to be benchmarked. So, let’s take a look at Centrifuge Labs (CF) using the same metrics. CL will soon be celebratign their 40 anniversary. They are an industry leader whose products feature drool-worthy European design, are quite expensive and are known to last. CL’s showrooms have become destinations for techies and tourists alike, however, their customer service is hit or miss, and the brand’s Social Media presence is virtually non-existent:

1. Time spent on the phone with customer service: Average 35 minutes (score: -6)
2. Time spent on your website trying to find contact information for customer service: Average 5 minute (score: -3)
3. Time spent learning how to use products: Average consumer, 1 hour, 25 minutes (score: -3)
4. Time spent waiting for products to come back from the shop: Average consumer, 18 days (score: -4)
5. Time spent consuming brand-sponsored content (video, custom publishing, website, Facebook, Twitter feed): Average time 5 minutes per day (score: 1)
6. Time spent at your retail location: Average visit 40 minutes (score: +7)
7. Purchases made: Average per consumer, 5 products per year (score: +5)
8. Perceived value of products: Luxiorious, sophisticated, and high end  (+8)
9. Frequency of repairs per lifetime of product: almost never (+4)

CL earns a C-ROI score of +8.

Let’s see how this might look graphically:

BP v. CL - Consumer Return on Investment

This is obviously a very simplistic example, just to show one way a brand might view C-ROI. For consumers, the visual may look like this:

Allow consumers to see which brands provide greater C-ROI

Now, imagine that an independent consumer advocacy group was in charge of scoring brands for their Consumer ROI and that these scores were made public? What changes would you make to your customer service center? How would you change the customer experience at your retail location? How much would you invest in making compelling content and engaging consumers online. Think about some of the big brands and what they do:

• Panasonic’s Living in HD user community
• Comcast’s Twitter customer service
• Scion’s content-rich website
• Nordstrom’s retail customer service
• Apple’s retail experience

All would gather big points for their efforts in these areas.  There are many examples of brands piling up negative points as well of course, but a Consumer ROI score could be a powerful, easy to understand way of measuring the value that a consumer would get for his investment.

Perhaps consumer’s could even weigh certain elemements (customer service, brand interaction) in compiling their own, customized C-ROI that takes in to account their personal preferences. Here, a site like Amazon or C-Net could let consumers filter choices by preference, creating a unique selection set based on their criteria.

I’d love to hear your thoughts on this idea. Is it viable? Who should be in charge of scoring? What other elements did I miss? I look forward to your comments.

Tags: consumer, index, ROI

This entry was posted on Tuesday, August 25th, 2009 at 10:11 am and is filed under Ideas. You can follow any responses to this entry through the RSS 2.0 feed.