Moving beyond ROI: 5 questions and answers that address ROE2

Return on investment is a measure commonly used by marketers. But is ROI still the most comprehensive way to measure modern marketing? We believe it is not.

Last week my colleague, Epsilon President and author, Andy Frawley, and I hosted a webinar with the American Marketing Association in which we shared a new way to measure brand and business success. The concept, Return on Experience x Engagement, or ROE², is introduced in Andy’s new book, Igniting Customer Connections. In the book and during the webinar, we also walked through proprietary research conducted by Epsilon that brings the concept of ROE² to life for industries such as automotive, grocery and travel/hospitality.

ROE² is a new measurement to guide marketing strategy and spend. By establishing experience and engagement as key indicators of customer connections and business outcomes, you can rethink how you measure your marketing success.

Marketers from top global brands participated in our webinar and asked a number of insightful questions. Below is a recap of their inquiries and our responses:

  • What’s the basic formula for calculating ROE²?

The formula is ROE² = f (EXi + ENi + Oi) where ROE² is the measure of brand and business equity for your business outcomes; EXi is measures of customer experience; ENi is measures of customer engagement; and Oi is other factors that influence business outcomes.

  • How do you define experience and engagement?

Experience is how the consumer feels about the brand and includes rational and emotional factors.. This can include a friendly and responsible staff, high quality products, good value for the money and a brand’s trustworthiness. Engagement, on the other hand, are actions the consumer takes, such as visiting a website, posting an online review, referring others or downloading a mobile brand’s app.

  • How do you measure the numbers for the ROE² equation? How do you determine if you got a good result or bad result?  

Regression results are typically evaluated based on R-squared, which is a statistical measure of how much of the total variation in the model’s outcome variable (in this case brand and business equity) is explained by the predictor variables. Generally the models we developed had medium R-squared values.

  • How can this measure be applied to healthcare? 

The application would be similar to how our research for Andy’s book was conducted. A key step is to inventory the various points of interaction between the consumer and the healthcare provider and then gauge those in the survey.

  • Have you found instances of ROI and ROE2 moving in opposite directions? What are the implications?

We have not done these types of comparisons yet. It is possible that ROI and ROE2 could diverge, since the former is typically a short-term measure of a specific campaign while the latter is a longer-term, more holistic measure that reflects the consumers’ total experience with the brand.