Quantipulation: ROI Versus Success

[This is a follow-up post to Quantipulation. I thought I could get away with just floating a few ideas out there, but some comments I've seen suggest that there's a lot more to quantipulation than I wrote about, and those comments are correct.]

Quantipulation — the art and act of using unverifiable math and statistics to convince people of what you believe to be true — is commonplace in the marketing world, but perhaps nowhere more so than in the social media environment. Especially when it comes to everyone’s favorite topic: Social media ROI.

Whenever I use the term ROI in my reports, the editor where I work asks me to spell it out. As she rightly says, there may be people who aren’t familiar with the term. I don’t tell her this, but if you don’t know what ROI is, I don’t want you reading my reports.

There’s another reason why she’s right: There may be people who define ROI differently than I do. I won’t tell her this, either, but those people don’t deserve to read my reports.

ROI = return on investment. It doesn’t mean return on influence or any other “I” word you can dream up. And despite what some quantipulators would have us believe there’s only one formula for ROI: Financial return divided by financial investment. The only “variable” piece to the formula is the timeframe you use to quantify these variables.

That won’t stop some people from trying to redefine the formula, however.

The most egregious example comes from a firm called Digital Royalty. I won’t besmirch my blog by linking to the offending post. Instead, I’ll point you to Anna O’Brien’s brilliant (and very funny) critique of it.

Here’s another example of ROI quantipulation:

My bet is that tthe firm that put this chart together wanted to include other ROI components, but since it would have messed up their inverted hour glass figure, they decided to leave them out.

Then there’s attempt at redefining social media ROI:

This guy has decided that the ROI unit of measure should be “conversation”. He goes on to tell us that we can measure the “value” of conversation by looking at participation, engagement, influence, imagination, energy, and stickiness. But not increased revenue or decreased cost. Sweet.

There are (at least) two things going on with these attempts to redefine ROI. One is bad, the other is good. 

The bad: An annoying attempt to demonstrate thought leadership. Ugh. Not the way to do it. Anna O’Brien said it best in her blog post: “Random metric names and symbols is not an equation.” (Maybe she didn’t say it best, because it should be “are not an equation”).

There is a good aspect to what the ROI quantipulators are doing, however. They’re raising the very valid point that there are other measures of success beyond ROI. 

There’s a formula for that, too. The one I like is from Pat LaPointe who writes a blog called Marketing NPV. Pat’s formula says that success can be measured by dividing the value added by the resources used. And as this formula implies, “value” can take on the form of many of those measures that those other people wanted to use to calculate ROI.

But this isn’t the whole formula.

Pat added something on to this formula that, as far as I’m concerned, qualifies Pat as a marketing genius. Pat’s formula for calculating success is:

(Value Added/Resources Used) * Perception

What Pat recognized was that what you might consider to be “value” might not be viewed as valuable by other people. Other people like, say, your CEO or CFO.

We’re living in an ROI culture. Suggest that your company do something, and somebody will ask “what’s the ROI on that?” If you want to get up in front of your management team and suggest that your company do something because you “feel” it’s the best thing for the company to do, go for it. Just don’t send me your resume when you’re on the street. 

That doesn’t make your feeling wrong. But being right doesn’t make you successful. Persuading others to do the right thing does. 

This is why quantipulation is so important:  Quantipulation is an attempt to influence perception. To be a successful leader, innovator, or change agent, you have to shape, change, and confirm people’s perceptions.

There’s a reason I call quantipulation an art. Successful quantipulators know that it’s about more than just the data – it’s about logic and emotion. And there’s no formula or recipe for figuring out how much logic and emotion to mix in with the data.

The examples of ROI quantipulation shown above fail not because they’re wrong, but because they fail to influence perception. Those formulas simply confirm for the social media believers what they already believe. That’s easy. Converting the heathen is hard.

Had those social media ROI formulas made any attempt to link social media results to the conventional definition of ROI — financial return — they might have been more persuasive.

Last thought: Quantipulation is not inherently bad or evil. Yes, it’s a play on the word manipulative, which doesn’t have positive connotations. But I prefer to take a more realistic view: It is what it is. And it’s a necessary skill for today’s business world.

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8 thoughts on “Quantipulation: ROI Versus Success

  1. Excellent set of articles. Although it appears that you too are guilty of Quantipulation in an article on Quantipulation. Just for the record, NPV – just as ROI – has an established formula. And last time I checked, ‘perception’ was not part of the formula. Market visibility is great, so are numerous followers and likes. However, none of these things replace the age old need to grow revenue and profits. Social media has not (yet) changed the basic principles of economics. Thus, success via social media, traditional marketing and everything else in business boils down to MONEY! It may be crass, but that is how it is. No need to invent new ways of determining success – ROI, NPV, payback period, EVA and a variety of other metrics work just fine.

    As you allude to in your posts, the problem is not with the measures (such as ROI and NPV), the problem has to do with inability to generate Revenues, Profits and Cash Flows.

  2. Great comeback, Ron. For all of the serial Quantipulators out there who besiege us with graphs, spreadsheets and all other manner of stuff that never points to a financial return, remember, we are not looking for Return on Inundation.

  3. Ron
    It is the, “Your customers are having conversations about you whether you are part of it or not .. ” messaging that goes hand in hand with a new definition of ROI that does not measure revenue generated or costs saved. I think I saw someone saying ROE, “Return on Engagement”.
    There is no uncertainty in their proclamations, every one is confident about their social media strategy recommendation. Of course the first rule of selling snake oil is to give up any self doubt.

    -Rags

  4. Serge: I’m not saying that “perception” is part of the NPV formula. Just recognizing Pat LaPointe for including it in the formula for “success.” But you’re spot on regarding the source of the problem.

    Kenny: You should get a trademark on “Return on Inundation”. I’d pay to reference that term. :)

    Rags: Snake oil. Bingo. That’s EXACTLY what it is.

    • Rebekah: Thanks for the kind words. Your blog post is spot on. However, I might quibble with you regarding the notion of soft ROI. ROI is ROI. There is no soft or hard. There may be other benefits beyond financial return, but those don’t qualify as ROI.

      • And in a bank there is only ROI (and more commonly now ROE).

        That doesn’t stop people levering up a business case with volume figures that just aren’t achievable for a nascent product, then resolving that the only way to get the newfangled mobileydigitally product to deliver is to throw more people and cash at it…

  5. Pingback: william azaroff » What’s the return on that investment?

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