ROE2 – Return on Engagement x Experience

by: Andrew Frawley

I have been in the CRM industry for 25 years now, as a CEO, President, or Founder of multiple marketing technology companies. During my time in the industry, I have seen many changes in the way marketers and consumers interact. My book, Igniting Customer Connections: Fire Up Your Company’s Growth By Multiplying Customer Experience and Engagement, discusses some of these changes.

Wiley, 2014

At its core, marketing is about creating and developing connections between customers and a brand. Whether that’s with an email, a direct mail piece, or a customer interaction in the store, the end goal is to develop a strong connection that yields revenue. To accomplish this connection, we focus on two areas—how people feel about a brand and what they do. We can also this Experience and Engagement.

Experience – How Someone Feels About A Brand

A consistent, personalized Customer Experience is possible with data.

Consider brands such as Coca-Cola, Apple, and Nike. These brands have created a cult-like following, mostly through their advertising and marketing efforts. For the last 50 years, brands have been able to use television to enhance those emotional connections, but now we can go even farther. With data, we can personalize customer interactions, so it feels like the brand is talking directly to them and strengthening the bond.

Engagement – What People Do

Until recently, all marketing in this area focused on getting people to make a purchase. After all, that was the only time they engaged with the brand. However, with the rise of technology, customers are interacting with brands 24/7, across a myriad of different channels. And it’s important to focus on these upstream engagements – we’ve seen retailers with 2x lift in revenue from customers who simply commented on a brand’s social media posts.

With the advent of technology and data, we can now bring these two concepts together. We can determine how a customer feels about a brand, and then market to them appropriately to get them to engage. When we combine these two efforts, the impact to the business revenue is exponential – ROE2.

Measuring ROE2 – A Short Math Lesson

ROE2 is a quantifiable way of proving the business aspect of your marketing efforts. But how can you prove it’s working with statistics? We use a tried-and-true statistical tool called multiple regression analysis, which is used to determine how a set of variables explain or predict an outcome. The variables are what we have been discussing – engagement and experience. While we don’t need to know the exact math behind ROE2, it’s important to know that it tells us the relative importance of each variable, so you can determine how to invest in various marketing activities that boost experience and engagement.   

Putting ROE2 into Action – Actionable Brand Idea

Actionable Brand Ideas are the connection between Engagement and Experience. These are the ultimate goal for marketers – something creative that garners enough emotion to get a customer to take a specific action. One example that I describe in my book is the Fedex loyalty program.

FedEx had a wealth of data about its customers, from their service needs to how they were using FedEx in their jobs. Through traditional marketing and price incentives, FedEx was able to consolidate their market share. However, they weren’t seeing a change in customer behavior. FedEx needed to find a way to connect emotionally with consumers to give them a reason to change their level of engagement.

What they found wasn’t all that surprising. Auto parts dealers are interested in NASCAR, lawyers and accountants are interested in golfing. With this knowledge, verified by data, they moved forward and created activations and partnerships with NASCAR, PGA, and NFL. For example, an auto parts dealer could earn the chance to get its logo on a car during a NASCAR race. These programs created an emotional connection between FedEx and its customer, and also generated millions in incremental sales.

ROE2 vs ROI – What to Focus On

ROE2 is the thinking behind your Actionable Business Idea, and we’ve shown that it can generate exponential amounts of incremental revenue. So, it makes sense to focus on and measure your ROE2. But what about the standard for measuring marketing today – Return on Investment (ROI)?

Consider this example: A national credit card company is examining their Direct Mail program. Their business card has one campaign, platinum another, travel card another, and student card yet another. It’s possible for a prospect of every card to be receiving 4 direct mail pieces in one month from the same company. While the ROI on each individual campaign is positive, the experience and emotions overall is less than ideal. In the short term, the revenue looks like its growing, but in the long term, customers are being alienated and their chance of converting gets smaller and smaller.

Looking at that example, putting a focus on ROE2 makes more sense long-term. And as stated earlier, marketing is the act of creating a good Experience to drive Engagement. I’ll leave you with a quote from my book:

“While marketing is often fueled by qualitative theories and techniques, ROE2 is a quantifiable, measurable attribute that provides a clear reflection of the importance of Experience × Engagement—and provides powerful inspiration to marketers to focus on these key areas.” 

Igniting Customer Connections: Fire Up Your Company’s Growth By Multiplying Customer Experience and Engagement. Wiley, 2014

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