Tuesday, September 25, 2007

What's your point of reference?

Whenever you analyse results from a marketing campaign, you need to frame them in relative terms - that's the great thing about ROI metrics - they are relative - i.e. what did you get out vs. what you put in.

Very often, analysts make simple mistakes in their calculations and miss simple errors. Because they forget to use a term of reference before they report, they send our garbage.

I learnt this lesson early on when my then boss, Jeffrey Merrihue (http://www.lostartofmarketing.com/) suggested some numbers i'd given him were likely to be b****ks. He took out a ruler and showed me just how wrong my pages of spreadsheet calculation must have been. Because i'd been up for 36 hrs straight (it was a bad week in Madrid) and had become lost in the detail, i'd lost my point of reference.

The biggest mistake analysts can make is not seeing the woods for the trees - is the result sensible and understandable? If not, take a step back and reframe the question. If you're not sure, check your steps!

One more thing - don't always trust your calculator. Excel 97 had issues running regression calculations using the analysis toolpack and now it appears Excel 2007 can't do a simple multiplication - try asking it to calculate 850*77.1. The answer shouldn't be 100000 should it?

1 comment:

Ron Shevlin said...

You are so right about the "relativity" aspect. It brings to mind the title of a recent webinar a marketing publication over here was pushing recently. I'm not going to remember the exact title, but the part that caught my attention was "earn up to 31% ROI with...." where the "with" was whatever approach or technology they were pushing that day.

My first reaction was: Where did they come up with THAT number? The answer, of course, was that the guy giving the webinar achieved a 31% return on a campaign using whatever approach or technology.

And, apparently, everyone else in the world can to, because he did. But what if my campaign requires 10 times the investment? Will it still be "up to 31%"? (Well, yes, because 0% is "up to 31%). But if my campaign is smaller, might I not achieve a higher return?

You don't have to stay up for 36 hours to lose your perspective on ROI calculations.