Return on Investment (ROI) vs. Value on Investment (VOI) …
I Chose Return on Investment, Let Me Explain Why
by Theresa M. Pinto, IOM
This debate started well over 10 years ago, and it still is going strong today. Like a pendulum we swing from one side to the other; for myself, I tend to lean towards ROI.
To be fair, there are some great blog posts out there that explain why so many associations were moving to Value on Investment models over Return on Investment. Here is an oldie but a goodie from someone (Cathy Hight of Hight Performance Group) whom I hold a lot of respect for…but I respectfully choose another path.
The process of determining your Return on Investment and Value on Investment is not for the hesitant. You must be willing to: (1) listen and validate what members/customers are saying; (2) make changes within the organization and (3) invest in the organization and members/customers.
For those who are brave enough, let’s start with my top three reasons for siding with ROI.
Reason One: ROI translates easier into Business Speak
Money in, Money out.
It is a simple concept.
The most effective means of communicating ROI, in my opinion, is the ROI Calculator Tool. A simple web-based “form” that members and prospects complete via your website. They answer a few questions, and voila! They can easily see the monetary return on their investment.
I love technology and automating workflow processes, so this tool is the bomb. It works 24/7 and is one and done. Meaning you design, implement and let it work for you without ever needing to maintain or manage. Not to mention this calculator becomes another tool for your membership person to use without much effort.
This is an investment. But in my professional opinion, well worth it. I have put this in at a previous chamber and I can honestly say it was met with overwhelmingly positive feedback from members; the membership department found it a great resource to refer prospective members to and it did have a positive impact on our aged receivables in terms of renewing members who were on the fence.
You can check out two examples of chambers using the ROI Calculator tool here:
Reason Two: Strong ROI supports VOI messaging
I am not convinced that Value on Investment can do the same for Return on Investment messaging.
Anytime you are discussing investment with a prospect, the initial declarative statement is critical; ROI presents facts. If you start the discussion with questions, you begin to go down a winding path; trying to determine what your prospect deems as high value.
I propose you start with the financial facts of investment and then supplement with value propositions the prospect has voiced to you. If your prospective customer inquires about advertising opportunities or laments not having enough time to do all the social media marketing they should, you have been given insight into what they value most.
In closing the discussion, you can then restate the financial return to their business and then support with what benefits and services you provide that they have expressed as high value. You then are not ending with an ask “Will you join?” but rather “Can your business afford not to invest?”.
Subtle difference, but powerful all the same.
A great example I came across was this Covington, KY chamber of commerce website. Check it out: http://gocovington.com/Chamber/Your-Return-on-Investment.
The Lansing (MI) Chamber of Commerce utilizes a member spotlight article to drive home a strong ROI proposition for its members.
Reason Three: ROI is tangible, VOI is perception
I know, I know…perception is reality. Let me be clear, this is not one over the other.
Tangible simply means that people can touch it and can feel the effect, both positive and negative. Money is very tangible to business.
Perception is open to influences such as emotions, past experiences, and subjective judgements. These can shift quickly and often. So, trying to engage with a prospective customer and build a lasting relationship which has a very tangible item such as money attached to it, is a moving target.
What is of value today, could be less important tomorrow.
As the millennial generation moves in and becomes the prevalent decision makers behind business and organizations, we need to think like they do and speak like they do.
As you consider both sides, let me share a story that was shared with me a few years back. It was one of those “aha” moments for me and changed the way I thought about this debate.
“An executive of a well respected and successful chamber of commerce meets with a local up and coming business owner. The entrepreneur is a male in his late twenties. The chamber executive makes the “pitch” about why his company should invest in the chamber of commerce. The business owner pauses, does not speak for a few minutes and then BOOM! His response was as follows:
“So, let me understand what you are offering. I make a cash investment in your chamber of commerce and in return you offer me opportunity; opportunity to invest additional monies for advertising and marketing which may or may not provide my company critical exposure to my audience; opportunity to be away from my business and my family to attend events (which requires additional investment to purchase tickets) where I may or may not meet someone who may or may not become a client/customer. In effect, you are offering me the opportunity to invest repeatedly both in terms of monies and time, with any potential return determined on my actions and my initiative.”
Uhm, yea…not sure how you would respond in this situation. I do know that I would not respond by weaving the Value on Investment story.
This scenario, I suspect, is going to be happening more and more frequently for membership, sponsorship, advertising, board development, etc. As the next generation of business owners demand that our organizations drive Return on Investment and deliver Value on Investment.
In conclusion, no matter which side of this debate you are currently on, I encourage all of us to continue to discuss this issue around the table. Dialogue and debate can lead to impactful change. Also, you do not need to rest forever on one side or the other. Coming to the center and having a strong ROI and VOI is the best of both worlds.
A great resource to share with your board members, your membership and your staff is the Schapiro Study: The Real Value of Membership. (A study produced by The Schapiro Group, Inc. and Market Street Services)
I have it available, just email me at firstname.lastname@example.org or go to our website under the Resources Page and request it.
As always, I am available to share ideas and discuss. You can find me on Facebook: https://www.facebook.com/virtualsuzyllc connect with me on LinkedIn: https://www.linkedin.com/in/theresampinto or check out our website: https://www.virtualsuzy.com