A good example of why focusing on ROC instead of ROI

I was this morning at a BNI meeting, in downtown San Jose, CA. BNI, for people who do not know about it, is a professional networking organization, helping people giving referrals to each other to help grow their business.

At a BNI meeting, among other things, you have a traditionnal educational part, explaining how to get efficient in networking. I liked especially this one, that was given by my partner, Jerome Sierra. Jerome talked about the ROI (Return On Investment) of networking, and trying to define it. The return on investment is the money you earn on an investment for 1 dollar invested.

The ROI of networking
His point was to let people understand that people can expect their rates of return to improve through the time they are part of a network. The more you know the people part of the network, the better they know you and you can gain their confidence. These two factors are crucial to get referrals, which means the profits you can expect and get will grow over time.

The ROC
That is something interesting, because it is exactly the same idea concerning the ROC. Indeed, I should have talked about it.
In direct marketing, ROI is king. We evaluate the success of a campaign based on the ROI. But if you have a customer relationship mentality, you are not focusing on a marketing campaign, but on building a long term relationship to increase your sales over the time. Therefore, we won't talk about ROI, but ROC.

The ROC is the return on customer, which you oppose in marketing to the ROI. A return on investment in marketing is calculated after a campaign, to check how much money you spent for a specific amount of sales. With the return on customer, you are not only considering the sales of a specific campaign but also the one generated in the future for a specific client. You will then be able to understand the potential of your client.

The bottom line is not to focus on a short term basis while talking about relationship.

The purpose of building relationship is indeed to get benefits on a long term basis.