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How To Measure Soft ROI

measuring_tapeIn my previous post, I took a look at what “soft ROI” means and some of the activities that make up soft ROI.  In this post, I provide some ways to measure it.

As stated in my previous post, measuring soft ROI is a challenge because it is highly qualitative.  In fact, many of the activities of creating soft ROI are often stepping stones in achieving hard ROI.  To differentiate soft ROI from hard ROI, hard ROI refers to savings related to time, head count, improved quality and subsequently increased dollars. Hard ROI is also tracking how many clients and new assets are brought in based on nurturing and converting prospects into new clients. While hard ROI may be the goal, adding soft ROI benefits to a business case is key in proving true profitability of an strategic business investment.

In The Business Case: The Hard Realities of Soft Benefits, it states, “Labeling a benefit as soft doesn’t necessarily mean that hard ROI payoffs don’t exist. It only means that its tangibility is not apparent and/or acceptable to the decision maker.”  Furthermore, it states, “A successful technique [in business case building] is bundling groups of quantified soft ROI benefits together into categories called ‘high impact benefits,’ ‘medium impact benefits,’ and ‘low impact benefits.’ Strive to make the total calculated value of each group at least equal to the tangible savings that have already been identified.”

To do this, you have to be able to identify those additional benefits that don’t necessarily factor into the “hard ROI” equation but nevertheless achieve desired results, and then sort them into high, medium, and low impact buckets.  Does the option being considered…

  • Improve customer service?
  • Reduce implementation pain (vs. other options)?
  • Reduce training pain (vs. other options)?
  • Provide more functionality?
  • Improve employee morale?
  • Increase employee commitment to a process?
  • Optimize use of resources (labor, space, etc.)?
  • Lead to improved billing?
  • Reduce carbon footprint?
  • Increase employee collaboration/customer engagement?
  • Improve competitive position?
  • Reduce confusion against competitive products/services?
  • Increase customer satisfaction/loyalty?
  • Expose your company to new, potential clients?

As mentioned in my previous post, many of the activities that go into creating soft ROI are, in fact, branding exercises.  Increasing brand value/equity creates on-the-books value for a company and is measured as an intangible.

There has been a lot of discussion lately about whether Facebook and Twitter are being valued too high.  Naysayers believe that since both are not making the hard ROI revenue that they should be, they are being overvalued (see Facebook’s valuation: The cheat sheet and Is Twitter’s Valuation too High?).  What some people don’t get is the soft ROI benefits that are being added to their brand value/equity.  A brand with high soft ROI (brand awareness, usage, differentiating strengths and brand loyalty, to name a few), which has potential high-growth hard ROI, may be a better investment, in the right leadership hands, than a company that has higher hard ROI results but fewer growth opportunities, for whatever reasons.

Getting back to the point of this posting, there are ways to measure soft ROI results.  The company I work with, C.A. Walker, does B2B and B2C survey research that can be used in the process of calculating soft ROI benefits,  therefore, I feel qualified in pointing out some of the ways this can be done.

  • To measure improved customer service, a survey can be emailed out following an exchange with the customer service team.  For example, a company may be interested in evaluating the soft ROI benefits of new call center software.  It would be wise for them to query customers prior to and after the upgrade to determine if there is an improvement in customer service satisfaction ratings, current brand perceptions, and willingness to recommend the product/service to others.  It can also be determined if resolution times are shortened (hard), if there are increased up-selling opportunities (soft/hard), and whether fewer customer service employees are needed due to improvements (hard).
  • To measure implementation pain, a company could evaluate expected pain across departments – those performing the implementation and those expected to utilize the new program – vs. other options.   In The ROI on IT investments, it is stated, “For many IT projects, the resulting value does not occur immediately but rather over a period of time.  Some of the other factors include how many people will be affected (either positively or negatively) by the investment, and how often the new application/system will be used.”
  • To measure training pain, a company could evaluate employees’ training experiences currently vs. that in a new program.  They can be interviewed post-training for feedback on how they feel about the new program, effectiveness of the trainer, persisting product/service confusion, difficulty using the program after training, and other qualitative measures.
  • To measure improved functionality, a company could evaluate, in advance, those functions that will be made available in the new product/service, however, those benefits won’t be fully realized until it is in the hands of its users.  They could survey (heavy/medium/light) users of the product/service to provide feedback on how the new functions have affected them (positive/negative) and suggestions for further improvements.
  • To measure improved employee morale, companies can conduct regular employee satisfaction surveys, which has the added benefit of sending a message to employees that they are open to receiving input and their opinions about likes/dislikes/challenges are valued.  Every employee should be included, or else a self-selected group of disgruntled employees may have the loudest voices and skew results.
  • To measure increased employee commitment to a process, employees can be interviewed to uncover reasons why a desired process is not being followed.  It can then be determined whether implementing a new program is likely to increase adherence.  Policy-breakers can be engaged in evaluating the new program, sending the message that this issue is important to management and hopefully increasing adherence once the new program is in place.  Post-measurements of adherence can determine success.
  • To measure optimization of resources (labor, space, etc.),  measurements should be gathered before and after changes are made.  Taking labor as example, certain departments may be over-worked and putting in long hours,  resulting in hard ROI losses if on an hourly wage, and certainly in soft ROI losses with decreased employee satisfaction.  Reconfiguring department and/or job assignments could improve this, thus potentially improving both employee and customer satisfaction.  Taking space as example, in There’s more to ROI than meets the “I” it states, “Installation of a new transportation management system might lead to improved freight billing, better route management and denser loads – all very real improvements, albeit tough to quantify.”  In this example, if shipping containers were packed differently to improve efficiencies, it could lower shipping costs (hard), and customer satisfaction improvements could be made due to receiving shipments faster or at a reduced rate (soft).
  • To measure improved billing, employees and customers could be interviewed to determine billing problem areas.  A new billing system could improve accuracy resulting in faster payment, and reduce stress (soft) and man-hours spent (hard) by sales teams who have to correct statements with the billing department.
  • To measure effects of decreased carbon footprint, it can be determined, for example, that a grocery store that replaces its lighting equipment with a less carbon-emitting option can result not only in cost savings (hard), but also in happier customers who prefer less harsh lighting and patronizing eco-friendly retailers (soft).
  • To measure increased collaboration, a company has to know what type of collaboration they are looking to improve.  It can be increasing customer engagement via their own online community, or employee collaboration using a CRM (Customer Relationship Management) solution or even a Wiki.  As example, in Quantifying Your CRM Investment, it states, “Measuring a CRM solution’s ROI can be a daunting process…a piecemeal approach involving smaller projects, however, can allow companies to easily measure factors such as increased call-center efficiencies and improved sales response times.”
  • To measure improved competitive position, it has to be evaluated whether a new program can create efficiencies that allow a company to better compete. In The Business Case: The Hard Realities of Soft Benefits, it states, “Wal-Mart’s decision to employ [a cleverly automated logistics system] was not justified with hard benefits…[but] led to an eventual takeover of retail leadership from K-Mart, [which] is a prime example of a ‘competitive-edge-based’ soft benefits business case reaping hard benefit rewards.”
  • To evaluate improvements in confusion against competitive products/services, a research survey may be conducted before an ad campaign to determine the competitive landscape, the brands in that category that stand out and why, competitive brand perceptions (strengths/weaknesses), and differentiating strengths of the company’s brand.  Post-campaign, a survey can again be conducted within the same target market(s) to see if these measurements have improved.
  • To evaluate increased customer satisfaction/loyalty, a research survey may be conducted to determine customer satisfaction measures, how well the brand’s products and competitive products fit into their lives, whether they would recommend the brand/product to others, and likelihood to switch to a competitor’s brand/product.  These  measures can then be monitored over time, in conjunction with the measures in the above bullet, as part of a brand tracking study to determine key drivers of loyalty, likelihood to use/purchase/recommend, monitor awareness/image/value-add trends over time, and provide a perceptual map of the company’s brand vs. competitors.
  • To measure exposure of your company to new, potential clients, it really depends on the marketing activity, but some soft ROI measures are:  number of business cards obtained, number of calls/meeting made (tied to a particular activity), number of people who view a presentation, source given for a sale, number of people who register for an e-newsletter, unique visitors to a website, number of responses to a blog posting, number of pingbacks (links) to your blog posting and the traffic they create, number of requests for more information and proposals, amount of daily traffic past a billboard where your ad is located, number of listeners to a radio program where your ad is run, number of incoming calls to a unique phone number, number of people who submit a promotional tracking code with their order, number of people who download a whitepaper, and so on.

In summary, I quote again from The Business Case: The Hard Realities of Soft Benefits, which says, “You need to believe in the power and relevance of soft ROI benefits. Many of the world’s greatest business success stories are built on the back of courageous business-case creators who convinced…executives that ‘hard to measure’…investments don’t automatically mean ‘bad’ investments.”

Happy ROI hunting!

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  1. Chuck Bishof
    October 21st, 2009 at 09:43 | #1

    I’ve read your threads before Rebekah and as usual you have a ton of great insight here. I think you can even get to quantifying some of these benefits by combining the work you suggest above with information about the distribution of financial performance outcomes in a particular industry or sector and then backing out the HARD benefits. Top performance in a sector AFTER HARD BENEFITS can be a good proxy (vs the mean) of the value of soft benefits like great customer relationships and highly engaged associates. Best Regards…..Chuck

  2. Jonny Stevens
    April 3rd, 2011 at 19:15 | #2

    Very good post. It would be interesting to see how much companies are using soft roi when deciding to implement a marketing plan. How would they go about estimating the expected sof roi?

    Great read though!

  1. October 18th, 2009 at 14:50 | #1

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