Return on investment
I was recently told by a nonprofit client that the board wants to see a clear financial return on their investment in the brand. You could look at this as a kind of a double bottom line request: a) We want to shift the perception of our brand as it exists out in the world, and b) We want a measurable and attributable return on our investment in that.
What do you do when the return may not show up so clearly on the balance sheet?
Return on investment is important. Return on investment in a brand initiative is very important. Measuring the results of any initiative and doing proper goal-setting for a project is an essential part of good governance, of good strategic behavior. But how do you measure the return when you are not really selling widgets? What do you do when the return may not show up so clearly on the balance sheet?
Let’s say I am an organization’s director of marketing and I am asked, “Can you guarantee a return of two million within a year on the one million we will invest in this brand marketing project?” I might be very hard pressed to devise a convincing set of metrics to prove that I had done it. Even if I did. The problem is one of attribution.
What I will have is signifiers: Everything will feel better. Fundraising will be easier. The external profile of the institution will rise, making it less of a task to recruit great people for the board or for leadership positions on the staff. The newly strategic brand will enhance the institution’s ability to do many things it may already be doing. As a result, the people who are actually doing those things will be able to do them with greater effectiveness. In many cases they will also want to take credit for these improvements. They may attribute some of their enhanced effectiveness to the new more effective brand strategy, but generally I suspect they may not.
The problem is one of attribution.
So how am I to show a direct line of effect from a brand campaign to the institution’s improved finances?
I may not be able to. How much is it worth to the organization, for example, to reduce confusion with a similar brand that donors often confuse with theirs? In theory, the achievement of this goal will have an impact on almost every aspect of the organization. It will make fundraising easier. The actual shift in the public’s perception could also probably be measured, but the direct financial impact of this perceptual shift is much harder to measure or to prove (especially to a non-believer).
The direct financial impact of this perceptual shift is much harder to measure or to prove.
What I can do is set goals for the brand campaign that reflect things of agreed upon value to the organization or the board. Set out a specific set of objectives and establish their intrinsic value to the institution. How much do we value this shift in perception? Do we believe that if achieved it will make an array of other important things much easier? What other criteria for success might we consider aside from or in addition to its direct financial impact? What are these other less quantifiable things really worth to the organization? What would having them allow us to achieve in terms of our delivered impact?
It would be better for everyone if there were agreement around the value of these things and if they were calculated in addition to the bottom line, so that after the money is spent and the impact data collected all can agree on the value of the results.
In general, a brand marketing campaign for a nonprofit—provided it is guided by a sound strategy—should improve the capacity of the institution to move forward toward its goals. So “What are those goals?” “Do we have the right goals?” “How will this effort and this expenditure support those goals?” These are questions at least as important as “What will the financial return on this investment be?” It may also be possible to measure the financial return and to even prove direct attribution to the campaign, especially if nothing else has changed, but doing this requires a lot of planning and hard work.
Arguably the real goal of any organization is ultimately related to its impact out in the world.
Arguably we are best served by working to get buy-in on a nonprofit brand campaign not because it will pay for itself, but rather because it will facilitate the achievement of our goals. An aspect of the goal may be financial of course, but arguably the real goal of any organization is ultimately related to its impact out in the world. The financial goals are all just a means to that end, and the financial impact of a brand campaign is likewise but a means to a larger ultimate end.
When I am doing my goal setting exercises I sometimes get some version of “to balance the budget” or “to increase revenue by 30%.” These are not really the goal. They are a byproduct of a larger, more ambitious goal, one with the capacity to galvanize excitement, effort and constructive action throughout an organization. Few people will rise in passionate dedication to achieve a goal of “30% revenue increase” without really understanding what that buys you in terms of the organization’s capacity to make the world better. The financial goals are either a means to a greater end, an end with more emotional resonance than money, or as it usually happens, the money is a byproduct that is spun off from the effects of the strategy put into action.
Especially in nonprofit organizations, it is ultimately a human equation that is supported by a financial one.
Obsessing over proving a direct financial return on investment may not itself be worth the investment. More importantly, it’s putting the emphasis on the wrong part of the equation. In all organizations and especially in nonprofit organizations, it is ultimately a human equation that is supported by a financial one. If you cannot get the human equation right, the financial equation fails to deliver. I am arguing here and elsewhere, that brand strategy is vital in the effort to make the human equation work.
Read “What if museums were run like successful companies?” for more on this topic and for more on strategic goal-setting, read “How do you set strategic SMART goals?”
Does your nonprofit need an affordable way to improve its brand today?
Because we know that not everyone needs or can afford our full process, we created a guided tutorial package for our foundational brand strategy tool: the Brand Pyramid. Watch the video for a preview.
For more information on this brand strategy tutorial, visit here where you will find a fuller explanation and link to a free download of the first video.
Photo by Liz Skolnick