Why measurement of return on investment needs rethinking

Businesses are living environments that bring together a host of systems, processes and people in a bid to produce value that can be traded; the lower the cost of creation and awareness the better.

With a multitude of options existing for customers and loyalty being an increasingly fickle commodity, large and small ventures alike need to rethink how they do business and start measuring every little cost centre and input into the business to determine its real contribution to the bottom-line.

Three universal centres are shared below for context.

Customers

There is such a thing as a bad customer and having a customer relationship management system in place, even a rudimentary one, can unlock insights into the nature and disposition of a current or potential customer.

For example, there are services that scour the web aggregating data that consumers leave behind as they live their digital lives, to the extent that a simple email address could tell you what level along the funnel a lead should be placed, if at all.

Custom dashboards can also shed light on which customers can be dropped, for example if monthly recurring revenue is low but costs of support and maintenance of the account are high.

Marketing and advertising owners of traditional mass media have been forced back to the drawing board as audiences have become fragmented and business owners more discerning. It was not long ago that rate cards were shoved in the faces of many marketing executives, supported by a scientifically modelled and arguably defensible estimations of the media houses reach that spelt premium product and circulation.

Even with digital media, you have to track the path to purchase to correctly attribute a sale to the medium, no more blind sowing of marketing seed.

Forget cost per click (CPC), cost per mille (CPM) and cost per action (CPA) and ask for more. If the bigger media players were smart, they would look into ways of enriching potential customer data to empower clients to better manage, personalise and convert customer experiences.

Staffing

How do you measure productivity and time utilisation by staff or seconded consultants in your business? In manufacturing, the correlation may be as easy as units handled per person per shift, where there is a baseline key performance indicator.

In some service sector niches, such as software development, it may not be as straightforward yet one must figure it out to allow for addition of the business margin to the applied resource and to also measure if over time the resource is worth the exchange of capital for time ceded.

There are stock tools and services that allow businesses to measure their inputs versus returns, but in many cases you may find the need to develop your own toolkit as therein lies competitive advantage and increased profitability.

Njihia is CEO of Symbiotic | www.mbuguanjihia.com | @mbuguanjihia