ROI vs. ROE: why this debate is missing the bigger picture

Source: Conexo

Warning: this may hurt a bit!

During EIBTM 2011 I had the pleasure to be invited at a panel session called ‘ROI vs. ROE’, organized by the MPI’s Spanish chapter (picture on the left).

Obviously, I could say many things about why you should always use the ROI Methodology… But for now I’m just going to share with you my main takeaway of the session: the so-called ROE may be a bigger threat to the meetings industry than what I had envisioned.

First of all, let me clarify that ROE has probably got as many definitions as people that talk about it. But in this particular session, ROE meant ‘Return On Experience’, and one of the main indicators of ROE was WOM, both word of mouth and word of mouse (which is the digital version of word of mouth).

Based on the comments by some panelists and the audience, I had the impression that event planners are now really excited about social media and most importantly, social media metrics. This should be a good thing, right? Unfortunately, it is only to an extent.

I feel like some event planners think that they’ve found the Holy Grail: now they’re able to set measurable objectives (I want to get 1,000 Twitter followers!) and easily show the impact of the event (I got 35 Retweets! The event’s hashtag was mentioned 20,000 times!). As I usually hear, event experiences are intangible, hence they can’t be measured, but social media help us to make them more tangible.

Alas, I think many of them are missing the point. The impact that your event had on social media should be part of your evaluation (if that was one of your objectives), and undoubtedly WOM will increase the ROI, but it is not connected to the bottom line of the company. How many of those who clicked ‘Like’ on Facebook are your target audience? How many of them will ultimately buy your product? And the questions could go on and on.

Usually, measuring something is better than nothing, but event planners shouldn’t fall into the trap of thinking that just by tracking the impact of an event in social media they’re doing the best job. Because, if one thing we’ve learned after the recession, is that most meetings and events do not have a strong business case yet (ask AIG…). By measuring ROE, we risk getting distracted and not focusing on the real value of the event.

Are you finding that strong focus on ROE as well? Do you think it hinders the measurement of the real value of an event?

The Triple Bottom Line and the ROI Methodology: what do they have in common?

A sustainable event contributes to the Triple Bottom Line by minimising damage to the environment, supporting local communities and providing value for money to stakeholders, sometimes referred to as Planet, People and Profit. 1
It may surprise you that the ROI Methodology embraces all three aspects of sustainability, not only the financial viability. And it is not just a tool for measuring results, it is just as much a planning tool. This is simply because if you intend to measure results, you have to start by setting objectives that are clear, measurable and logically connected. This is the most important prerequisite for planning a successful event.
Consider the ROI Pyramid as your planning as well as your measurement model. You plan by setting objectives from the top down, and you measure from the bottom up.
Meetings and events can only create value to stakeholders by changing the behaviour of participants. There is no other value creation mechanism. This is the Level 3 in the Pyramid. Behaviour leads to Impact and Return on Investment.
For a business event, the ROI is a monetary calculation, a statement of contribution to shareholder value. For a non-business organisation, the impact on its mission is the ultimate value. For the International Cancer Society, the mission is to combat cancer and the event needs to make a contribution to this end.
After setting objectives for Impact and Behaviour, we ask ourselves what Learning experience (Level 2) will lead to the change in Behaviour. How will participant Satisfaction and Learning Environment (Level 1) support the Learning? And finally, what number and types of participants, the Target Audience (Level 0), provides the largest possible multiplier for the ensuing Chain of Impact, measuring results step by step up the Pyramid towards Impact and ROI.

The ROI Methodology

People, Planet & Profit
All events have several stakeholders. We need to set objectives and measure results as a separate exercise for each of them. When there is alignment of objectives, this is no problem. But sometimes we have to reconcile conflicting objectives. By introducing the concept of sustainability, we simply add the local community and the environment, People and Planet, as stakeholders, and reconcile objectives.
Alignment between Profit and People is not too difficult to achieve as events provide business to the local community, and can do even more so by sourcing local products and services.
The Planet is trickier as events often generate large amounts of waste and invariably leave a carbon footprint. Perhaps ROI will be better by going virtual, or hybrid (both virtual and real), but then there is less benefit to People, less business to the local community.
In the final analysis, it is always a matter of value to stakeholders. It would be a shame for a business event, for example, to have a negative impact on the environment and also make a loss to the company. If we have a negative impact on the environment, we had better make sure to maximise the positive impact on People and other stakeholders. By using The ROI Methodology to plan and measure the sucesses of events we are able to to analyse and reconcile objectives for each of the core three spheres of sustainability, People, Planet and Profit. The Methodology creates effienciencies, supports the implementation of sustainability objectives and provides a framework for measuring the results.

Article written by Dr. Elling Hamso and Rosa Garriga Mora

“ROI washing”, a new phenomenon?

I think that ROI measurement is suffering from a phenomenon that I’d say it’s similar to the so-called ‘green washing‘. According to Wikipedia, green washing refers to the ‘deceptive use of PR in order to promote a misleading perception that a company’s policies or products are environmentally friendly’.

In the ROI case, I’d say ‘ROI washing’ is a new ‘dangerous‘ trend. At my new role as Marketing Manager of the Event ROI Institute, I’m paying close attention to every mention of ROI. And what I’ve been finding is that ROI is being used as an equivalent of ‘value’. Obviously the ROI Methodology is about increasing value, but also much more: evaluating impact, setting objectives, benchmarking, and so on.
I’ve seen so many companies just mentioning ‘by using our product, you’ll increase your ROI’. But are they assuming the client is measuring the impact? Or are they providing any kind of metrics?

I expect that every for-profit company provides an increase of my ‘ROI’, if not why are they doing business?  However, I think this wording is misleading and it’s ultimately a shame if this means they’re not going to take advantage of all the other benefits that ROI measurement has.

Do you also think ‘ROI washing’ is a new phenomenon, or this is all non-sense? Is it good or is it counterproductive that ROI is included in marketing communications in such ‘unconscious’ way? Or is it me that I’m making false assumptions?