Wikipedia defines return on investment as 1) as rate of profit, rate of return or return and 2) the ratio of money gained or lost on an investment relative to the amount of money invested.

At Web Liquid we believe return on investment is a subset of a larger marketing imperative. That marketing imperative being RETURNS. This is not only an imperative from our clients but what leads our thinking. They give us something; we give them something of more value in return.

The challenge with assuming return on investment is the holy grail of all marketing measurement is that return on investment is a measure of investment profitability, not a measure of investment size or quality. The reality is that marketing investments need to be measured across multiple criteria, instead of a single profitability index. Why does the return of marketing investments have to be measured beyond ROI? Because marketing influences qualitative metrics as much as it influences quantitative or economic metrics.

Consumers do not make decisions to purchase or interact with a brand purely on economic factors so why should the marketing targeting those individuals, be measured on that basis? Furthermore, the value of advertising is in its ability to spark inspiration and need, emotion and thought; from those things that make up everyday life.

A lot of companies talk about their focus on return on investment. At Web Liquid we know return on investment is a subset of a larger marketing challenge. RETURNS. So how do we measure RETURNS? We measure RETURNS based on five metrics.

1.  Influence:  the influence the investment yields on consumers’ attitudes and perception of a product or service. This metric will become increasingly important, as social media will trigger new attitudinal behaviors.    

2.  Exposure:  number of impressions and exposures the investment yields – the “exposure value” of the investment.

3.   Efficiency: cost of sale the investment yields relative to the success metric (e.g. car rentals).

4.   Volume: total number of acquisitions or actions the investment yields

5.   Profitability: the total return on investment of the investment. ROI is simply a profitability index that expresses the relationship between investment and revenue generated. Having said it is important to understand the entire chain leading to ROI. I created the diagram below to provide a visual representation of the commercial elements that make up return on investment. It is important to note the role of “customer perceived value” and how it is nurtured by multiple factors including customer experience, word of mouth and advertising.

 What are the benefits of the measuring RETURNS through multiple variables? Consumer behavior, like the performance of media investments, cannot be explained or predicted by merely looking at just one variable.

For example your media investment for a campaign can yield a return on investment or profitability index that is 50% higher than your competitor. However, this could have come at the expense of reduced exposure, market share and percieved value in the marketplace.

It is to easy for agencies and client alike to measure RETURNS relative to a single variable such as return on investment. RETURNS have to be measured across multiple variables that take in consideration the influence, exposure, efficiency of  media investments. 

We believe this approach to RETURNS has not only helped us become the Most Efficient Digital Marketing agency (as voted by New Media Age), but generated $133,535,453 in revenue from our clients’ investments in online media last year.

While we cannot disclose the specific influence, efficiency and volume figures due to the confidentiality of our clients data, we generated over 1.5 billion impressions in exposure for our clients last year, yielding a profitability index or return on investment of 19 to 1.

return on investment, roi, media, profitability, webliquid