The big advantage of well designed KPIs is their immediate connection to simple and basic values. But what we actually want to talk about is ROI, and ROI is always about money. Don’t say ROI unless you really mean it.
We have defined values, we found KPIs that could be assigned to values, and we have taken care that KPIs were really easy to measure. You will need them frequently, so it should not be a big effort to keep them up to date.
What we need now is money. The values and KPIs we have defined must be transformed into easy understandable terms that can be visualized and that have a clear financial connotation.
So there are three things to do:
- Find your financial values
- Create charts
- Fill in the data and talk about money
Financial values are relations, ratios and terms that are related to time, work or directly money. Some examples: The value is efficiency, the KPI is the time editors spend to create content, so the financial value is the amount of money you can save if editors spend less time for editing then before. Another KPI for the value efficiency is if the search works well, if the users know for which terms to search for and which contents can be easier and faster accessed using the menu. If users spend time using the search instead of just getting to the content, we can assume that they loose two minutes figuring out a search term, reading the search results and deciding where to click on. So the cost of bad search terms is the number of bad search term occurrences times two minutes times the average salary for two minutes work.
On the other hand we can assume that good searches save two minutes of time: Users don’t have to browse around, don’t have to test using trial and error – so it takes them faster to their results. The financial gain of good search is thus the number of searches (with clicked search results) times the average salary for three minutes of work.
Care about the details and really question your data. But stick to things you can measure, don’t try to add metaphysical value – that just leads to trouble and discussions. Another example: Is it efficient to use Wikis, what is the use of having nonprofessional authors publish content? To answer this question, reduce it to it’s really simple financial dimensions. How many pages does an editor publish during his work time? We assume it’s approximately 30 pages per week or 120 pages per month. If we relate this to 100% of an editor’s salary, each of the 120 pages costs 0,83 % of a salary.
Compare this to Wikis. We assume, that Wiki authors contribute around five pages per week and spend and our per page. So five pages take 2,5 % of an author’s work time, that makes 0,5 % of a salary for one Wiki page. Thus we can indicate that wiki pages are cheaper than CMS pages – but we also need to relate that to user figures to deliver indications for whether Wikis are just cheaper or really more efficient. This is why charts and visualizations are really important to support the financial indicators.
Some values can not be measured without the help of additional criteria. User comments do show participation, rss subscriptions show that users really appreciate your content – but how does that relate to money? In our sample project, we introduced a participation value of 12 $. Check out advertising fees your company is actually spending, when you have to define your participation value: How much money does your company spend to reach users with advertising, how much does it spend to activate users eg to fill out a form or to submit data? Get these values, compare them to your usecases, and define your own participation values. This not only gives you figures to operate with, it also brings you in a position to defend your choices: You did not invent these values, you are not responsible for the amounts – they just reflect a real amount of money your company is actually spending in order to achieve efficient communication.
We used participation values to rate the participation of users through comments, rss subscription or also consumption of non-mandatory contents like blogs, wikis or also movies.
Creating charts is the easy part once all criteria have been defined. Nevertheless, it is extremely important to have good visualizations – not only to support the formulas and foster understanding, but also visualize ratios and illustrate the true dimensions of the defined values. Charts need to show development over time, but they also need to illustrate dimensions and ratios.
And they are a good means to simplify things: it’s impossible to get rid of all uncertainties and stakes are high that you will have to discuss the same things over and over again -charts are very good in getting faster to the end. If they can be explained in one line, they take you directly where you want to be. (If they can no be explained in one line, they are bad charts anyway.)
Now as we have money in the game and we know that financial dimension of everything – do we know if we are doing good or bad? We can fill in some values in our formulas and we will get results; sometimes it’s money, sometimes it’s just some ratios or some indexes.
There are values that we want to be as high as possible, but there will also be values that should be as close to zero as they can get; some values even have to be as close to a certain amount as it’s possible.
So it’s not won yet. The values we have calculated are monetized, but we need to relate them to our general targets. The indication if this value should be higher or lower is one of the few things that has to be added from an external point of view; it can not be derived from the system we have defined.
Setting the targets should be easy. Most of them can be derived from common understanding, and they should fit to your general business strategy. This is important: Targets have to be compatible with your business strategy. That’s not only self explanatory, it is extremely important that you can show and explain this relation if you want to sell your dashboard to the upper management. This supports our business – that must be the main message of everything you say.
Actually – you should not say anything more at all, unless someone asks.
That means, that you don’t only have create the target driven relation, but you also have to go into one more round and aggregate a first-glance-overview of all the values you have defined and calculated so far. Something anybody can look at and decide immediately, if this company is doing good or bad.
This will be the main topic of the fourth and last part of this post – watch out for it.
Together with the last part, I will also publish all the background material that in detail illustrates the processes described so far.
Part 1: ROI – social media metrics based on investments in the future
Part 2: ROI Dashboard – User Experience Indicator 2