Why we need to change ROI – today

We’ve all experienced it: that eye-roll moment when someone brings up return on investment (ROI) as the sole indicator of success or justification during a sales and marketing meeting.

And it’s no surprise, considering that the term has been bandied around for nearly a century since its inception in 1914. But times have changed, and businesses today look vastly different. So, why do we still rely on this outdated and antiquated practice to measure our organisations, teams and budgets?

The corporate landscape has undergone significant transformation and it’s time we shift our thinking. The primary issue with ROI is that it focuses solely on economics – it only assesses the financial elements of a deal, campaign or initiative. However, as partner marketers, we understand that achieving business growth and boosting sales is like an iceberg; the part you see (and measure with ROI) is only a fraction of the activity and time that goes into winning a deal.

It’s not that ROI lacks usefulness; it remains a highly effective way to measure tangible financial outcomes. The issue is that it shouldn’t be the sole tool for measuring success. There are numerous intangible soft benefits, such as brand awareness, influence, engagement and reach, which contribute to securing every sale.

Speaking at a recent Coterie Community event in London for around 40 partner marketers,  Hannah Jenney, head of marketing at Exclusive Networks UK and Ireland, said that we need to articulate the intangible value delivered by channel marketing. “We know it’s effective, we know it’s why relationships build and margins grow, but if we measure [value] purely with ROI, we don’t capture reality,” she said.

The consensus in the room was that return on investment had become the focal point, overshadowing the value that partner marketers bring to the business in our pursuit of financial achievement and measurability.

Shona Bettany, professor of marketing at Huddersfield University, summed it up: “ROI is the old economic adage of knowing the price of everything, but the value of nothing. ROI fails to consider the complexity of actions that go into making a successful brand and business. There is a complex web of activity that incites customer engagement that leads to sales and growth.”

So, what’s the alternative? Enter value from investment (VFI).

Lily Lazarevski, senior global channel marketing manager at Infoblox, explained: “Growth is about more than just ROI. VFI considers both financial and non-financial benefits, which provides a more holistic understanding of total investment. Value, though not easily measured, contributes heavily to an organisation’s performance and drives long-term results.”

The challenge, as Lazarevski pointed out, is how to measure these value-based accomplishments alongside traditional ROI.  

Unsurprisingly, the partner marketers at the event had some thoughts on this. Many agreed that we need to shift perspective on value, goals and remuneration if we are going to start acknowledging these softer values.

First, measuring value is not a short-term strategy. Building brand awareness, reach, influence, and understanding the value of partners in the ecosystem are gradual activities that require consistent messaging, regular attention and a dedicated budget.

Another crucial area discussed was the necessity for shared goals and recognition of value creation.  One community member offered a compelling analogy for the challenge we face. Think of a business like a steam train – where everyone contributes coal to keep the train moving. The question is, does it matter who puts the individual pieces of coal in or is it the collective effort that matters, to ensure the train never stops?

Bettany said this is key to understanding and measuring value: “Not every single piece of coal that you put into that engine is going to be directly measurable in terms of its value, but the train will keep going. We need to develop a more qualitative, deeper understanding of how value is being created within an organisation. Some people are value generators just by being in the business due to their knowledge, experience and contacts. Recognising an individual’s value is vital. Businesses have become too spreadsheet and metric-oriented and instead need to listen to the value stories.”

During the Coterie Community discussion, there was a consensus that VFI should be included as a shared KPI between the sales and marketing teams. This ensures everyone is aligned and working towards the same goal, while also receiving the recognition they deserve. The community emphasised the importance of having a management team that respects and understands this concept because it’s crucial for overall success.

To summarise the discussion, Lazarevski from Infoblox provided an insightful conclusion: “ROI and VFI are both important metrics for assessing the profitability of investments with channel partners, and only by considering both can we go beyond the concept of simple profit maximisation, to consider a more holistic and long-term measure of profitability and the wider value impact of our investment.”