1. Marrying for the Money The ROI of Relationships SXSWi March, 2011 Jen van der Meer Dachis Group @jenvandermeer #MROI

3. Wall St. @jenvandermeer I calculate ROI in my sleep

4. 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

6. 4 Cases

7. Case study 1: The rich husband

12. 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

13. Length of relationship? 5 years

14. Revenue per year: $100k $1MM $1 MM $10K $100k

15. Profit per yearly transactions $900k $900k $-90k

16. 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

17. Successful relationship? 11.1 x return

18. Case study 2: Skippy

19. Skippy lives for 14 years $50 x 12 months x 14 years $300 x 14 years $20 x 12 months x 14 years - $8,400 - $4,200 - $3,360 = - $15,960

20. Initial cost: $2,000 Revenue: $0 Lifetime cost: $-15,960 ROI = $15,960 - $2,000 = $-17,960 $2,000 = -898% Skippy ROI: the value of a dog

21. < ROI Conclusion:

22. What is the problem with measuring the transactional cost of a relationship? What we value most are the transactions that cannot be measured . Immeasurable. Beyond measure. Priceless.

23. Case study 3: Value of a Facebook fan

24. Value of a fan: Vitrue: $3.60 (earned media) Syncapse: $136.38 (layer cake of value) Cost of a fan: Webtrends: $1.07

25. The value of a fan:

26. Problem with value of a fan view Fans and customers Customers who are not on FB “ Fans” who don’t buy (haters, totally unqualified) #ROIFAIL

27. Case Study 4: Holistic customer Life time value

28. Gas profits

29. Marketing Decision:

30. Gas customer lifetime value 2006 2007 2008 2009 2010 Revenue Costs x year Profit x year 1 time acquisition cost Year 0 -$100 $1500 $1800 $2100 $2500 $3000 -$1410 -$1692 -$1974 -$2350 -$2820 $90 $108 $126 $150 $180 + + + + $100k - = $554 $654 $100 = 5.5x

31. < ROI Conclusion: <

32. 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.

33. “ 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.&quot; - @garyvee

35. SO WHAT. (do we measure).

36. Healthy relationship? # and quality of: hugs. kisses. pleasant surprises. help around the house. positive reinforcement. listening. mutual support. shared experiences?

37. 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.

39. 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.”

40. 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.

41. fitbit

43. Energy Hub

45. James Burke: Applying Analytics to Relationships

46. Analog analytics

47. 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.

48. thank you! @jenvandermeer