Calculating a Return on Investment (ROI)

To calculate a return on investment, you need to connect the communication you did with a change in audience behavior, because virtually all behaviors have a financial impact for an organization. If employees or customers or reporters do something differently, it will result in either an increase in revenues or a decrease in costs. This means you will not be able to calculate ROI based on an increase in awareness or knowledge or an improved opinion. Until knowledge and attitudes result in a behavior change, you have nothing to attach a monetary value to.

Once you quantify the behavior change, usually with the help of others in your marketing, HR or operations departments who monitor those behaviors as part of their jobs, you need to identify how much credit you can take for the resulting behavior change. It’s easiest to do this for situations where no one else was trying to influence a particular behavior so you can take 100 percent of the credit. For example, one friend of mine used communication to get employees to use a special access code before dialing long distance. The telecommunication manager gave her communication full credit for the resulting increase in the percentage of calls made using the access code, which resulted in a $20,000 a month cost savings.

If there are other active programs also trying to influence a specific behavior change, your two best options for taking the right amount of credit are:
      A. Use a pilot/control group approach where the only variable is your communication, and all the other potential factors are basically the same.
      B. Use a survey to identify how many of the people who changed their behavior say they remember your communication, and ask them what percentage credit they would give to the communication in influencing their decisions or behaviors.

Then, calculating ROI is easy:

1. Gross return: Start with the financial value of the behavior change for which you can take credit using either the A or B approaches above.
2. Subtract the cost of your communications.
3. Net return: The difference between one and two is the amount of financial value to use in the ROI calculation.
4. Divide the result by the cost of your communications to end up with a percentage return on investment.

Angela Sinickas, president, Sinickas Communications, Inc., has been measuring the effectiveness of communications since 1981. Her prolific publications and speaking engagements on the topic since then have made her name synonymous with measurement of organizational communication. Angela and her measurement work have been cited in Harvard Business Review, Investors Business Daily, HR Magazine, Executive Solutions, PR News, Journal of Communication Management, Ragan Report and Communication World, among many other publications.

Join Sinickas her teleseminar “What’s Your Communications Campaign’s ROI?: Make Sure Your Business Outcomes Measure Up!” on Thursday, April 23 at 3 p.m. EST!