January 8, 2013 4 Comments

Stop using ROI…

… when you are talking about an outcome that is non-monetary.

Awareness of a cause is not a monetary outcome. Certainly you can save money on the promotion of the cause, but your end goal is awareness. It’s non-monetary. You either generated more awareness or you didn’t.

Election to office is a binary, non-monetary outcome. Either you won or you didn’t. The bribes you take in office might be a return on your investment, Congressman, but the outcome itself is non-monetary.

Subscribers to your email list is not a monetary outcome. The subscriber can have value downstream if you plan to monetize your list, but if your only goal is subscribers, then it’s a non-monetary outcome.

ROI in one easy slide

The only time that ROI applies is when your outcome involves dollar earnings and dollar expenditures.

(technically, for the math folks, you can have ROI without earnings if you are okay with -100% ROI, where you lose it all. 0 earned – x spent / x spent = -100% ROI)

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  • jimdougherty

    Thanks Christopher! Love that you point out that you can calculate ROI for anything so long as you’re comfortable in the red. Great post!

  • http://twitter.com/GatewayCFO Josh Turner

    Good thoughts, I agree with the underlying premise of what you’re getting at. That said, the definition of a “return” doesn’t have to be monetary. The return you’re looking for could be awareness, subscribers, or an election…but it’s still a return, and there was still an investment of some sort to realize it.

    • http://www.ChristopherSPenn.com Christopher S. Penn

      Thanks, Josh!

  • CHopeMurray

    Good point, all too often ROI translates into a monetary equation. However the formula (e-s)/s = r applies to any action or effort and the quality/quantity of the benefit that accrues from it. The return or result is usually why the action or effort is conducted, and can be tangible, as is the case with money. More often “s” is effort, time, consideration, or care and the return is fulfillment that can only be measured subjectively. That is a wide gap, yet I believe that ROI can cover anything and everything in between.