RoE Is More Important Than RoI (Here's Why)

Marketing is expected to deliver a positive RoI.

And that's difficult for a ton of different reasons.

But before worrying about RoI...

First you need to fix your RoE.

Here's why - and how.

P.S. If you're looking, here are a few things to help you:

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Transcript

SPEAKER_00: 0:00

This is the Marketing Director Daily, and I'm Tim Parkin. Let's talk about ROI. I'm sure you've been thinking about ROI. Every marketer is concerned about ROI, and they should be, because everybody in leadership and most people in the company understands that ROI is important, that the return on investment of anything is significant, is meaningful. And unfortunately for us, marketing is viewed through the lens of ROI. That if we give marketing$10, we want to get that$10 back and then some. And that may be reasonable, but it's often quite unfair for a lot of reasons. One of those being attribution, how do we properly understand and measure when a deal is closed, how much or where or when were they influenced by marketing? It's a very difficult thing to understand and to figure out and to prove. The second problem is the time frame, the horizon, which is if we spend$10 on marketing today, we don't get that$10 back tomorrow. In many cases, we won't see the return on that investment for months, if not years. And so the time frame, the horizon that you look at and measure ROI, matters a lot. That we're continually investing in marketing, but the return doesn't come until the future, far off in the distant future. So those are two of the big problems around ROI: attribution and the time frame that it takes to recoup our investment. But there's a lot of other complexity and nuance and difficulty with understanding and measuring and proving ROI and marketing, which is why I think ROI is still important. However, in the short term, there's a more tangible, easier KPI that we can look at that we should be focused on. And that is ROE. ROE is the return on effort. Similar to return on investment, which is about dollars and cents, ROE is about understanding that you and your team, if you have one, only have so much time in the day, only have so much energy to expend to invest in marketing. And that yes, you do have a limited budget as well, but are you spending your time and effort in the right places that are generating a positive return, that are creating progress and building momentum towards the inevitable outcome that you need to deliver upon. So return on effort is similar to ROI, but it's about where are you spending your time and which priorities are you focused on? And are those delivering success? There's a lot of ways to look at this, but what I've found over the years of coaching marketing directors is that oftentimes we're not focused on the right things, that we're too strategic and not tactical. And that as a result, our ROE is very low, that we spend a ton of effort and get very little in return. And this is a huge problem. And there's a lot of reasons that this happens, but one of the major contributors to this is that we just don't have enough support. We don't have enough team or people, which means that we often feel like we need to juggle everything and do everything. And some of that is true. When you're the only marketer on the team, there's nobody else to help you. And you have to do all the stuff. However, you get to choose what all the stuff is. And often we keep adding things without subtracting things. Or we think that we need to do everything right now, and we don't. We need to prioritize and we need to be strategic about which things we do, in what order we do them, and how we do them. And so return on effort is key to understanding where are we expending effort, where are we investing our time, and is it working? Is it worth it? And will it deliver us to the ultimate goal and objective that we want to accomplish? So recently on one of the roundtables, I shared this diagram, and it's seven boxes in a row horizontally. So if you imagine a row of seven boxes. And if you think about effort versus outcome, the effort that you put into something and the outcome that you get. If the boxes can be green, which means outcome, and red, which means effort, then I think most of us put in five or six boxes of red of effort to get one or maybe two boxes of green of output. That's a six to one ratio. Six effort for one output. That's not good. That's a lot of effort for very little output. And the Pareto principle, the 80-20 rule, tells us that 80% of our results will come from 20% of our efforts. And so what that means is that most of the effort that you're expending right now on marketing is wasted. It's not delivering a result. It's not generating the outcome that you want. And you're not seeing the progress or the indicators of progress that you should be seeing. This is good news and bad news. The bad news is you're wasting a lot of effort and time. And maybe you already know that. Maybe it already feels like that. But the good news is you can stop a lot of things that you're doing, that you don't have to keep going down this road, that if you zoom out and look at things from a perspective of ROE, of return on effort, where are the areas, the things, the tactics, the channels that you're spending way too much time and way too much effort and just hitting a brick wall? Because if you can find even just one of those, but two or three of those, you can stop it. You can move on, you can focus on a couple of the right things that actually matter, that will actually get you where you need to be. So step one is to zoom out and say, where are you spending your effort? Where is your time going? And you can do a time log audit where every day, every 15 minutes, you just write down what are you working on right now. You can look at your calendar over the past couple of weeks and see which projects and tasks and meetings have I been involved in. You can look through your email or your project management tool and just see what am I doing? What have I been doing? And where has my time been going? That's step one. And then evaluate each of those priorities, each of those channels, each of those strategies or tactics you've been pursuing, and evaluate are these working? Are we making progress? Are we getting results? Are we seeing the signs that we will have results in the future? And if you compare those two things, one, where your time is being spent and has been spent, and two, the results that have accrued from that, it'll become very clear to you which things are you doing that are working and which things are you doing that are not. And once you find the things that you're spending a lot of time and effort and energy on, you have only a couple of decisions to make. One, should I stop? Should I give this up for now? It doesn't have to be forever, but it could be for now, for this season, for this month, for this quarter. Is this something that's not working? Then we just need to put it on the back burner for a minute so we can focus on the other things that actually do matter, where we actually are seeing results and progress. That's one option. The other option is to just kill it entirely. Is this not worth doing? We thought it was a good idea, we pursued it. Maybe it was from the top they said we should do this. We've done it for a while, it hasn't worked yet, and it's not worth trying to figure it out. Let's just stop it entirely. That's another option. The third option is to say, how do we change this? How do we do better? We know this is important. We know it could work for us, but it hasn't. And there must be some problem here. And do you need outside help? Do you need to consult with an expert? Do you need peers to surround you to share their experiences? How can you get help to figure out where the bottleneck is at and how to get past this hurdle so you can make it work? If it truly is important, if it is a priority, but it's not working for you and you've spent a lot of effort on it, let's figure out how do we change it, how do we tweak it, how do we optimize or improve it to make it work for you. But all of this goes back to the first step, which is to zoom out, to step back, to let go of the keyboard and the mouse for a minute, to not worry about that next meeting or finishing that task, and to just spend some time thinking, being strategic and thinking about not just the ROI in the future, but the ROE of now. That have you and your team been spending your effort in the right places? And as a result of spending the effort in those places, one, are they the right places? And two, is that effort generating a return? Take a minute or a few moments and reflect on that. Look at your time and your energy and your effort, where it's being spent, and decide is it working? And then make a plan to figure out what changes do you need to make, which things do you need to step back from, which things do you need to throw out the window, and which things do you need help with. So you can make sure that every minute you spend on marketing generates the highest ROE for you.