The Return on Investment from Insights Part 2 – How to grow your budget
By Andrew Cannon, Executive Director, GRBN
Part 1 of this blog focused on why you need to care about the ROI from insights, and just in case you missed it; here’s the link. The first part of the blog ended with a plea for you to make a ROI audit the foundation of a strong client-agency partnership, which unites everyone behind a common objective, which in turn will help ensure that everyone’s budgets grow. Part 2 of this blog shares tips on how to successfully implement a ROI Audit.
The importance of measuring the return on investment from insights was highlighted during our panel discussion at IIeX, which featured Simon Chadwick (Cambiar), Kathy Cochran (Boston Consulting Group), Lisa Courtade (Merck) and Alex Hunt (Brainjuicer). Alex and Simon both shared data highlighting the fact that still today few insights teams are considered to be strategic consultants by their senior management. Importantly the data shows that there is a clear correlation between the measurement of ROI and the perception of the insights team as a value-adding strategic partner.
You can learn more about the findings from the two projects through these links:
WFA Future of insights project in co-operation with Brainjuicer
BCG, Yale CCI, and Cambiar 2015 Consumer Insights Benchmarking Study
I would like to take this opportunity to thank Kathy, Lisa, Alex and Simon for being on the panel and sharing their knowledge, and I would like to share with you a few key take-outs from the panel discussion.
Become a Strategic Partner
This is key to budget growth. To be a strategic partner you need a strategic plan for the insights function, which is aligned to the business functions and processes and has a sharp focus on where and how insights can best add value on a strategic, tactical and operational level. Using this type of framework will not only help you partner with key stakeholders throughout the business, but will help you get the opportunity for C-Suite discussions.
The importance of communication cannot be underestimated, with you need to make insights famous for driving business growth. You also need to be seen and heard within the organization outside of research projects: you need to have a point-of-view and share your perspectives on the issues of most importance to the business, ideally in a compelling story-like format.
The measurement and communication of the business contribution, as well as the return on investment from insights, is also key. Getting senior management buy-in is critical to the success of the insights function and ideally the insights team should be championed by at least one member of the Executive Team. In my opinion the CFO is an ideal candidate for this role, since the CFO if anyone will understand and champion the ROI Audit.
If you work on the client side, I hope above insights help you become a strategic insights partner. If you work on the agency-side, I encourage you to use the above insights to help your clients’ insights teams become strategic consultants.
10+1 tips for setting up a ROI Audit TODAY
I’m a great believer in doing things and doing them now. Doing an ROI Audit is not an exercise in perfection; but it is about being methodological, as well as creative, and it is about employing a healthy mixture of science and art.
Few people argue with me about the importance of measuring the return on investment from insights, but not everyone I have spoken to knows how to go about it in practice.
I hope therefore that the following tips encourage more people to take the plunge and start measuring their ROI.
1. Be realistic
Don’t bite off more than you can chew. Match the complexity of your audit to your current situation by taking into account how readily available the required information is and the time you have available.
2. Get Senior Executive buy-in
Use an inside-out approach by matching your audit to the organization and the cost/profit centers.
3. Segment your projects
Create a list of relevant segmentation attributes for your projects, including internal client, supplier, type of research, method etc and code each project using those attributes.
4. Define your ROI variables
Whilst direct financial variables are best i.e. dollars earned / dollars saved, the impact of insights on the business is not always straight-forward. Create a list of surrogate measures for the direct financial variables. These will vary from business to business, but could include customer life-time value (one of my favorites), share of wallet, brand consideration, brand loyalty, NPS… Make sure you know the link between each variable and the direct financial variable.
5. List your assumptions
Especially with respect to measuring longer term ROI, no-one expects you to have a crystal ball. When you’re forecasting the ROI on a new factory investment one of the key variables will be the price of raw materials over, say, the next 20 years. No-one has that information, but so long as the assumptions on which the forecast are made are transparent, that is good enough. You should approach the long-term ROI from insights in the same way. Ask your finance team for assistance.
6. Don’t forget cost savings and cost avoidance
We often like to focus on topline growth, but it is just as important is to measure the impact of insights on cost savings, which can often be an even more important short-term metric for the C-Suite. One important driver of costs is time, so don’t forget to look at the ROI of insights from a time-saving perspective either. Finally, insights can also play a major role in cost avoidance, for example a poor investment in a new product, which is also a clear measure of the ROI from insights.
7. Don’t forget qualitative evidence
Whilst numbers are great, stories are just as important. For some projects you won’t be able to come up with a hard number, but perhaps there is a story to tell. For example, a quote from department head explaining how insights made a decision process more efficient and reduced the investment risk.
8. Start with your budget hogs
You probably won’t be able to quantify the ROI on every single project, so start on the ones that take the biggest slice of your budget. If you can demonstrate the ROI on the 20% of the projects which account for 80% of the budget, you’re be well on your way to proving your ROI.
9. Identify the drivers (and barriers) to ROI
If you follow these tips, you’ll end up with a list of projects along with the ROI (actual or estimated) for at least some of the projects along with (hopefully) some juicy stories. You can now use your segmentation variables to explore where you have been most and least effective at delivering ROI. Use this analysis along with a qualitative evaluation of the projects, especially in terms of process, to identify the factors which lead to a higher ROI, as well as the factors which limit the ROI delivered.
10. Get your agencies on-board
Share the findings from the audit with your agencies. Work with them to improve the ROI on the projects they deliver.
10+1 Shout all about it
Present your ROI audit to your boss as well as the CFO. Communicate relentlessly about the value generated across the business, in particular using case studies and inspirational stories of successful partnerships with internal stakeholder. Make insights famous for driving business growth. Finally, don’t forget to ask for a bigger budget for next year based on the ROI you have delivered.
Of course the process doesn’t stop here. You want to take action based on the audit and start planning for next year’s ROI Audit.
In terms of actions; make immediate changes to your processes and your budget in order to capture low hanging fruit. Start planning for longer term changes to your processes and budget allocations. Make your agencies ROI partners and share with them your knowledge about the ROI triggers and barriers. Challenge them to not only change what they are currently doing in order to improve ROI, but to also propose new ROI generating solutions.
In terms of next year’s audit; make life easier for yourself by adding a ROI section to all internal and external briefing documents. Make sure your internal stakeholders include the expected ROI in their briefs, and make sure your agencies state the anticipated ROI in their proposals. Consider using a tracking tool to measure your ROI performance half-yearly, quarterly or even monthly.
If you work on the client-side I hope you find these tips useful. If you work agency-side, why not share these tips with your clients?
Ready to act? Take the GRBN 100-day challenge!
Thanks for taking the time to read this blog. I hope I have inspired at least some of you to action. In which case, please go to http://grbn.org/grbn-100-day-challenge/, where you will find a couple of challenges related to value to clients and the return on investment.
The aim of the 100-day challenge is to create a global movement of positive change for the research sector by taking on critical success factors for our sector: one person, one company, one action at a time. So please go ahead and sign up.
If you are a client-side budget holder, perhaps a suitable challenge for you to take over the next 100 days could be:
“I’m going to make an ROI Audit and propose a 20% increase in the insights budget for next year based on that ROI.”
If you are on the agency-side and work with clients, perhaps a suitable challenge for you to take over the next 100 days could be:
“I’m going to ask my clients to evaluate the ROI we have delivered to them over the 12 months and work in partnership with them to make changes needed to significantly increase that return over the next 12 months.”
Is there really any good reason why you shouldn’t act today?