NewsLine Column: ROI: Another Buzzword Bandwagon?

Return On Investment (ROI) has become something of a buzzword in recent times. However, Charlie Makin, Chief Operating Officer at BLM Group, argues that its increasing popularity is more to do with media agencies seeking to move up the food chain than about a genuine desire to provide greater accountability to clients.

In the last month, return on investment has become a buzzword amongst media agencies. Zenith are claiming it as a core principle, and yesterday the IPA commented that media agencies should focus more on return on investment following a piece of research on the recall of financial advertising.

I see a bandwagon developing. A few years ago strategy was the buzzword in media and agencies quickly positioned themselves on the basis of their thinking, insight and understanding. I get the feeling that return on investment will follow a similar trend. I noticed yesterday Mindshare referred to in the Financial Times as a media investment house. I see why media agencies want to move up the food chain, but I think there are many potential hurdles on the way.

There is a fundamental difference between the emergence of strategic thinking and the ambition to determine return on investment. The development of media strategy was important to the advertising process in that it addressed a major vacuum in the contribution that media agencies were making to advertising. This was inevitable with the consequent explosion of media opportunities. In summary, it was about improving input. Measurement of return on investment of media expenditure is very different – it’s about output. I see ROI as the analysis of the relationship between a wide variety of variables and, consequently being, a complex and imprecise science. Sir John Banham, ex Director General of the Confederation of British Industry said in the introduction to Advertising Works 7 that “we are in danger of valuing most highly those things that we can easily measure and discounting those we can’t, meaning we are often precisely wrong rather than approximately right.”

Return on investment is a complex area for media agencies to get involved in and I would suggest caution before grabbing it merely as a piece of positioning. Isolating the effect of media investment from a communication strategy is not straightforward. Many other variables have far greater effect and most of these are out of the control of the media agency, ranging from the weather to the quality of creative work. Committing to improving return on investment of communication without being in control of all aspects of the process is probably not possible. Also analysis we have done in this area often suggests that short term tactics ranging from promotions to exploiting direct channels demonstrate a far more quantifiable short term return than longer term investment in advertising.

I suppose in summary I am suggesting that in the constant search by agencies to be different from each other and be more relevant to clients, there is a danger that we might create expectations that we cannot deliver against. I am not a Luddite. I think accountability is vital and I recently co-wrote the first paper from a media agency to win 3 IPA Effectiveness Awards. However, one piece of learning I got from the winning paper was that we were able to prove that for every pound we spent, we generated 19 because we had some control over every aspect of the process and the client, Domino’s Pizza. A more complex model would have made it far more difficult to isolate the effect. Return on investment is too important to be used as piece of competitive positioning if the media industry has ambitions to be taken seriously.

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