Marrying for the Money The ROI of Relationships SXSWi March, 2011 Jen van der Meer Dachis Group @jenvandermeer #MROI
What you’ll need to get ROI from our time together today: <ul><li>1-2 Napkins </li></ul><ul><li>Felt tip pen </li></ul><ul><li>Basic math skills </li></ul><ul><li>At least one relationship to measure: </li></ul><ul><li>_Dog </li></ul><ul><li>_Friend </li></ul><ul><li>_Mom </li></ul><ul><li>_Customer </li></ul><ul><li>_Potential fiancée </li></ul>
Wall St. @jenvandermeer I calculate ROI in my sleep
ROI is under attack! @ehuddleston love it. Measure success through operational metrics that are meaningful to biz and focus social ROI on exception mgmt @ jhagel # SBS2 011 @mghoza #e20 RT @ an dyjankows ki : "What’s m issing in most #social business attempt s is a systematic link to metrics that matter." @ jbernoff # sbs2011 @tstaley ROI analysis for social software is a "fool's errand" John Hagel # SBS2011 @tmuellernyc We are at an inflection point, a social generation replaces spreadsheet generation. @ jobsworth , # SBS2011
Good news: you can measure the ROI of ANY relationship <ul><li>= - 567% </li></ul>
The stats upfront <ul><li>Time frame: 2006 </li></ul><ul><li>Job: Real estate lawyer </li></ul><ul><li>Education: Ivy undergrad, top law school </li></ul><ul><li>Prospects: Real estate developer </li></ul><ul><li>Current salary: $80,000 + 20k in bonus </li></ul><ul><li>Salary of fellow alumni: </li></ul><ul><li>$1 MM in combination of cash + bonus </li></ul><ul><li>Increasing 100% each year </li></ul><ul><li>Investment: fabulous wardrobe $100,000 </li></ul>
Problem: ROI framework Data that was needed at the start: Length of relationship Cash transaction amount per year Profit per transaction Understanding of stocks vs. flows Cost of investment to initiate relationship
Profit per yearly transactions $900k $900k $-90k
Marriage lifetime value 2006 2007 2008 2009 2010 Revenue Costs x year Profit x year 1 time acquisition cost Year 0 -$100k $100k $1 MM $1 MM $100k $10k -$100k -$100k -$100k -$100k -$100k $0 $900k $900k $0 $-90k + + + + $100k - = $1.61 MM $1.71 MM $100k = 11.1x
So we CAN measure the ROI of a relationship. But transactional value distorts the purpose of why people are in business. Why they become customers.
“ Your grandparents are far more prepared for what’s coming than you are. They understood the human connection, small-town rules. All of you who just worry about metrics , numbers, roi, you're going to die." - @garyvee
Healthy relationship? # and quality of: hugs. kisses. pleasant surprises. help around the house. positive reinforcement. listening. mutual support. shared experiences?
Customer referral value According to Kumar, Petersen, and Leone, your most valuable customers are those whose word of mouth brings in the most profitable new customers, regardless of how much they themselves buy.
Wall Street Secret Revealed: Customer Lifetime Value is not something that “the street” cares about. When CMOs and CTOs say ROI, they really mean, “show me a pretty dashboard.”
How far can we take this? As the social graph reveals a huge volume of data about our actual relational behavior, we have an opportunity to pause for a moment: to consider the value system reflected in how we measure each other, ourselves, our relationships in the world.
In conclusion: ROI can be measured. But human connections are fluid, dynamic, and worth more than financial transactions alone. To measure the health of a relationship, define those actions of reciprocity and advocacy.