Return on investment (ROI) measures project or campaign returns relative to related costs over time. It provides a single number, allowing executives to prioritize their marketing spend. As with other business metrics, developing a practical ROI methodology involves creativity and certain judgment calls. This doesn’t mean it can’t be directionally accurate and therefore very useful.
To date, ROI hasn’t been applied to blogs. This is partly due to blogging recent introduction to the marketing mix. Many blogging experts have suggested calculating a blog ROI is impossible. As a professor, I teach students how to tie marketing to the bottom line. Calculating ROI for a blog should be no harder than calculating it for other marketing components.
To place ROI measurements in context, you must first understand how blogs fulfill different business objectives. Creating and maintaining a blog is often part of a larger corporate communications effort (this site offers further corporate blogging insight).
Some business reasons for blogs:
- Establish expertise. Many consultants effectively use blogs to raise their visibility with their target market.
- Create alternative media. A number of publishers have built viable media outlets with loyal followings, as have companies that produce sponsored blogs, such as Gawker Media.
- Extend corporate communications. Blogs enable companies to present a human face and voice to the public. The most notably example is Microsoft’s Robert Scoble.
- Build community. Use blogs to grow groups around a technology, cause, political issue, or hobby related to your product.
Like PR, a blog returns may not be fast. A blog needs time to build readership. Not every blog entry yields buzz, and you can’t control which ones do or whether the buzz is positive. Blogging is a form of strategic PR to raise your brand’s or company’s salience, not a carefully timed marketing promotion.
Given your goals, develop a set of metrics to assess your blog success. To calculate a blog ROI, convert these success indicators to a dollar equivalent. This is the aspect of ROI that tends to be elusive. To this end, look at how you value other marketing components and how you calculate their metrics. Remember, these are internal company metrics. Therefore, they must be only reasonably accurate. Some practical approaches to consider:
- Media placements. Like traditional PR efforts, blogs generate media placements. Though these don’t readily translate to financial numbers, at a minimum you can monitor for the quantity, media format, quality, brand, and reach. Based on your specific business needs and culture, establish a method to assess these factors value. (Check out this site for insights on evaluating PR.)
Alternatively, assign a dollar equivalent for placements using the outlet’s ad rates as a guide. This assumes the value of editorial and advertising media impressions are similar. Many PR professionals don’t approve of this approach as they believe it undervalues editorial endorsement. Further, they claim it doesn’t take into consideration quality differences in placements (e.g., a technology mention by Walt Mossberg in “The Wall Street Journal” versus a minor mention buried in Yahoo) and whether it’s on message. While I appreciate their perspective, companies need a way to assign a value to placement results. Ad cost equivalents are a good starting point.
- Direct revenues or traffic. When the objective is to grow a business or create an alternative media venue, new leads and ad revenue can be tracked directly. Blogs drive site traffic in a trackable manner, such as the GoDaddy Super Bowl ad discussed on GoDaddy CEO blog.
Consider discreetly and judiciously placing offers in your blog. Use a unique URL, and they’re measurable. Readers received a special NetFlix offer on Steve Rubel Micro Persuasion blog, for example. If the blog is the only component of the mix that changed during this period, any sales left can be attributed to it.
- Improved search rankings. Because blogs are spidered by search engines, monitor links and trackbacks for measures influencing branding and revenues. Many companies pay for search placement, so assign an equivalent dollar amount based on average placement cost or by use of a search engine calculator.
- Brand effect.Use surveys to monitor consumer perception of your brand and company before and after blogging. In some businesses, a percentage point change in mind share has a dollar value, making this calculation relatively straightforward. If not, create an equivalent metric based on the amount of marketing investment needed to achieve similar results.
- Increased buzz. Monitor improved consumer perception. This can translate into increased sales using word-of-mouth measures or surveys. Like other branding efforts, give an approximation for sales lift. At a minimum, you know what it would cost to drive equivalent buzz using another format.
- Promotion generation. Consider the value created by similar promotions, such as a microsite or guerilla marketing effort, as a measure.
The investment portion of the equation is easier to calculate. Remember, these costs happen over time while high-profile blog posts happen sporadically. Compile the relevant costs, including:
- Direct cost factors are clearly related items that are discrete and easily tracked. They can encompass blog creation, creative, paid writers or services, PR or ad agency fees, and any related server and operations costs.
- Soft/shared costs are more difficult to assess. These can involve executive blogging time and resources such as corporate communications. These valuations are judgment calls. It may not make sense to calculate the value of a senior executive’s time per week spent blogging as a portion of her salary.
Combine the revenue and investment components to yield an ROI calculation as follows:
ROI = [annual profit (loss)]/investment costs
Where profit (loss) = dollar value of success metrics – fixed costs – variable cost
With fixed costs = relevant ongoing marketing and overhead associated with blog
With variable costs = costs associated with product sold
With investment costs = one-time costs to launch the blog
When assessing blogging ROI, put it in the context of your corporate hurdle rate, the minimum ROI any project must achieve, or an industry standard. At minimum, your blog ROI must be positive. The true value of developing a blog ROI is to enable management to make an informed decision about the worth of blogging efforts. Just because blogging is new, you can’t assume evaluating its effectiveness is impossible. Like any other marketing component, blogging program performance can and should be measured.
The web doesn’t have a traffic problem, but it has a conversion problem.
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