When I speak to business owners, the most common question that I field about New Media is: “But what about Return on Investment (ROI)?” The question is fair enough. If I, as a businessman and your New Media Evangelist, am “spreading the gospel” of New Media, I should be able to make a business case. Right?
So let’s give it a try:
- If I spend $10,000 and get $11,000 back, then I have a return on my investment of 10%.
- Or, if I invest $100,000 into new software that saves me $40,000 per year, that investment will pay for itself in two and a half years.
Profit is a two variable equation. If I can increase revenues and/or reduce costs, then I have a positive Return on Investment.
But what happens if I invest $0 and get some sort of benefit from it? How do I then calculate ROI? How does one divide by zero?
- I can download WordPress and have a blog up and running on my own site — at no cost.
- I can use my little hand-held digital camera to record a video demo of my product, place it on YouTube, and pay zilch for every person who sees it.
- I can build a page on Facebook or Linked-in, connect with colleagues, get introduced to prospects, and get answers from trusted resources — for nadda.
- I can microblog on Twitter, breaking industry news, pointing customers to relevant information, or providing expertise to those who seek it — for scratch.
- I can take digital photographs at a trade show, load them onto Flickr, and share them with my favorite customers — for nil.
- And I can use RSS to keep me informed about my industry, my customers, and my finances — for bupkis.
Therefore, if I receive ANY increase in revenue or reduction in costs from my cashless investment in these technologies, whether it be a sale, a prospect to call on, or a piece of branding, the ROI is infinite.
The bean counter will quip, “But, Ron. Time is money.”
Yes it is. And that’s the basis of my argument. Management is about determining the proper use of corporate resources. Because New Media technologies offer such high (divide by zero) leverage, managers should at least consider if a small investment of time makes sense. The upside is too high to ignore.
Let’s take one example. I know a blogger who writes for a large corporation. He writes a blog post every other week. He’s told me that he spends, on average, two hours per post. After 6 months of blogging, he had built an audience of about 300 RSS subscribers.
Let’s say that the fully burdened cost of his position (salary, benefits, office, computer) is $200,000 per year. Rounding that number to $100 per hour (for a 40 hour week), the blogger’s employer is spending $200 every time delivers a message to 300 PRESENT subscribers.
But a blog isn’t a one shot deal like that of a marketing campaign, tradeshow booth, or corporate newsletter. A blog represents a growing repository of relevant content — a searchable database for both PRESENT and FUTURE readers. Today my example blogger has over 500 subscribers. With every additional subscriber, his cost per prospect/customer touch is shrinking, from $0.66 to $0.40.
That’s the investment. Now let’s look at possible returns. While gaining an audience, your corporate blogger is:
- establishing trust with a growing audience
- becoming a respected expert in your company’s field
- becoming sought-after resource as opposed to yet another person to be avoided
Therefore, what is the ROI if your blogger:
- is asked to speak at a major industry conference?
- accompanies your business development people on a sales call?
- spurs a customer to contact your company directly?
- can instantly respond to the fear, uncertainty and doubt (FUD) that your competitor is spreading about your company?
Are “returns” such as these worth prioritizing and “investment” of one hour per week? Are they worth 1/40th of your employee’s fully burdened cost?
Something to consider as you start your FY2009 planning?