Digital comes with a promise, that is the complete ability to measure and analyze our results.
In many ways, that promise was a way to help us all make the shift, to help us to see the value of shifting from traditional media to the array of opportunities that the digital world held for us.
As with many complicated topics, the narrow view of clicks, conversions, engagement, audience, and reach is a great way to get us started, but quickly becomes a limitation in the way that we think about what’s possible in digital.
In order to unlock our thinking and expand our strategic creativity, we must first embrace the concept of Soft Value.
Soft Value appreciates that humans are complicated creatures. We are not the logical, linear decision makers that our neat and tidy persona charts would make us out to be. We wander through the world with biases, beliefs, relationships, and conflicting information.
By contrast, Hard Value comes from all of the numbers that we’re comfortable with: ROI, ROAS, earned media, website traffic, and micro-conversions (ie. email sign-ups).
Similarly, our organizations are much more complicated than a $ Generated – $ Spent = $ Success model.
While soft value isn’t linear, it doesn’t have to be difficult, and it can be incredibly liberating.
I’ll offer a basic framework for thinking about your organization’s soft value in a way that can be productive:
We’ll define Value here as anything that increases the assets on your balance sheet, reduces costs, or increases a previously valued KPI. In each scenario, there is a clear and established method to value the outcome, so our work is simply to make the connection in order to make better-informed investments.
We’ve spent a lot of time thinking about this model, so I’ll give a simple example:
Company ABC sells adventure products via retail and has invested heavily in social media content and storytelling. They are planning their budget for 2020 and are faced with three options for the social content line: Increase it, decrease it, or leave it flat.
To make the decision, the CMO suggests that they look at what the spend to date has earned them, and then model out what each of the three scenarios could potentially get them.
To get to the value to date, she asks her team to find the following numbers:
- Total e-commerce revenue generated from social media traffic
- Total new email sign-ups from social media traffic
- Average Customer Lifetime Value of an email
- Total number of retail customers who filled out a comment card and listed social media under “how did you hear about us?”
- An estimate of the value of the new followers and engagement that the brand has picked up
As I’m sure that you can see, the data that her team collects starts nice and solid but gets progressively more ambiguous. Regardless, the team soldiers on, and they attempt to assign value, mashing together a few different measures of value to create the following:
- $100,000 in e-commerce revenue from social media traffic. Sales value = $100,000
- 10,000 new email sign-ups at an average CLV of $50. Customer lifetime value = $500,000
- 500 retail customers listed “social media” on their comment cards with an average order value of $100. Retail sales value = $50,000
- 50,000 new followers and 500,000 total engagements. The social ads team says that a follower costs $3 to acquire, and an engagement costs $0.25, so the math is simple. Alternative cost-based value = $275,000
- Sum it all up and you have a total value for the year of $925,000
When you look at the budget that it took to get them there, between their 3 full-time staff, software, social ads, creative agency, content and consultants, the total cost for the year was $500,000.
The CMO looks at those numbers and she knows that the answer should be simple: they’re making almost a 2:1 ROI on their spend, so they should aggressively increase their budget.
However, the CFO wanders over and peers over our CMO’s shoulder. What she sees is very different. To the CFO, that follower and engagement number is entirely hypothetical, and the customer cards are nice but not an accurate indicator. She can wrap her mind around the email sign-ups as potential future revenue, but discounts it because CLV is full of assumptions that we can’t control for. The only number that she can take to the bank is that $100,000 in revenue, which means that social actually lost $400k last year, and the company should be looking to slash and burn their social spend.
So who’s right?
The answer is that we can’t possibly know, because we don’t have a few key pieces of information. That’s where most of us are with our digital – we’re trying to make incredibly challenging investment decisions while being pulled in a variety of different directions and incomplete data.
Here’s where the Soft Value framework can help our CMO out. Return to the questions that she first posed to her team, and broaden them to uncover the actual value to the organization by asking the following questions:
- How does our PR team/agency measure earned media?
- How much did social generate this year?
- According to the way that we currently value earned media, how much value did we generate?
- According to the way that we currently budget for earned media, how much cost could we save by investing in social?
- How does our HR team currently value the cost of a new hire?
- How many new hires came to us, or chose to work with us, because of our social content?
- According to the way that we currently value recruiting, how much value did we generate?
- According to the way that we currently budget for recruiting, how much cost could we save by investing in social?
- How does our investor relations team currently value communications with the investing community?
- How much of this metric did we effect?
- According to the way that we currently value investor relations, how much value did we generate?
- According to the way that we currently budget for investor relations, how much cost could we save by investing in social?
She should continue to ask these questions as it applies to each value or cost centre in the organization until she’s found all of the value that exists.
Notice here that every question is objective – this exercise is not about inflating or deflating any metrics, it’s simply about dispassionately evaluating the value and costs to each area of the organization. It’s also about appreciating the complexity of our organizations and the people who we serve. We can no longer draw straight lines from costs to revenues in order to strategically plan. Instead, combining hard and soft values gives us a data set that we can actually use to make informed decisions.
Another important thing to notice is that the exact same questions can, and should, be asked in every area of the digital organization: Your website, its search rankings, your earned media and its affect on SEO, your recruiting, etc. Everything is connected and, until we appreciate that, all of our strategic choices will be semi-informed guesses.
If you’re interested in having an assessment done for your organization but don’t know where to start, we thought you’d never ask. The Junction team is uniquely set up to help organizations with exactly this dilemma: Where is the value coming from, and where are the unlocked opportunities?
Check out our contact page for ways to get in touch with our team and let’s start a conversation.