Marketing Innovation and Cost Benefit Analysis: Don’t Measure all Technologies the Same.

One of the challenges with new technology is the more disruptive the technology, the least likely its benefits can be measured in the moment. When looking at platform technologies, we often use the same metrics we would use when evaluating point solutions, e.g. increased revenue, quality, customer satisfaction and decreased cost, and risk.  Marketing innovation often calls for moving to new platforms, or technologies where the measurable benefits aren’t as clear.  Using the wrong metric or criteria can cause you to over invest in old technology where the costs and benefits are clearer and under invest in the new, where the majority of the benefits are uncertain.. This has big implications for those looking to be on the cutting edge of marketing innovation.

The CFO and/or the CIO may have very clear metrics or criteria to use when evaluating the adoption of potential new technology. Most of the time this works extremely well when trying to choose between two different pieces of hardware, or software, say two competing CRM systems. The problem emerges when trying to evaluate a new platform or disruptive technology such as the Internet when it was new.  In the CRM example, it is clear how to compare the new technology to the current process or compare to another CRM system.  Existing customers or case studies can provide some real numbers in terms of cost/benefit. In fact third parties such as analysts firms may have already done the work. Here a ROI calculation is much more straight forward. However, how do you compare your existing process with one that has not yet been invented?

It was “funny” watching companies try to develop an ROI for building a web site. If they did not currently sell online, they saw no increase in revenue, and it was not clear any costs would be reduced or reduced enough to justify the expense. Then companies struggled to determine how much to invest in the site, since it had no discernible ROI. How do you justify moving from a static site to an interactive one? It was only much later it became clear what the benefits were, but it still might not make sense from an ROI perspective.

A more current example might be what’s the value of improving the consumer experience on your mobile web site? Can the improved experience be justified by a higher ROI due to a higher conversion, and if it can’t, do you not make the investment?  What about investing in augmented reality, building Nav apps, etc. to improve the user experience, do you make the investment without a compelling ROI? How does the CMO show these investments make or made sense, when there is not a change in conversion or customer satisfaction?

When you move to a new platform, the problem is it opens up new options many of which don’t yet exist. 

Let’s say you are a bank, and you can’t justify building online banking capability for your customers. Your argument is there are plenty of ATMs, and branches so people already have ubiquitous access. So you use the zip codes of your customers and location for large volume transaction data to determine the best locations for new ATMs as a way to improve mobile access. You can’t get a positive ROI from a move to mobile, but you can get one with the addition of another ATM.

Now you want to consider the move to mobile, but again, you can’t see getting an increase in deposits or loans or other transactions, so you don’t make the investment. Instead you make the investment in a new physical branch.  You can see the problem. Before long you are over invested in older technology and have a much less compelling value proposition to current or potential new customers.

When you move to a new platform such at the Internet, or “The Cloud”, what we can’t measure are the options that will exist as more people build new technology on top of the new platform.  When you invest in a new platform, you are getting something similar to a basket of “embedded options” meaning you have the right, but not the obligation to invest in future applications. For example, if add Internet capability to your digital architecture, you have the right but not the obligation to build a web site, send and receive e-mail, conduct e-commerce, make VOIP calls, start an online community, etc. You can exercise your options to do all or non of them. Moving to the cloud or adopting an Internet of Things approach will provide options to do things not possible today.  It is the value of those options which are so hard to measure and why you need to measure them differently than you would measure typical point solutions.

Shifting to a new platform is more like a binary decision, is this a new platform or not? And if it is, then we need to start considering how we will make the shift and how we will use the new platform to create competitive advantage. This is where marketing can start doing some brainstorming and try to think about how this new platform could be used to improve existing critical marketing metrics from sales, user experience, retention and lifetime value.