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COI publishes first-ever paper on Payback and ROMI in the public sector
A common approach to calculating the financial effectiveness and efficiency of public sector marketing is possible according to a new report from the Central Office of Information (COI).
The paper shows that the 1998-2005 Teacher Recruitment campaign not only paid for itself; but should provide returns of another £85 for every £1 spent. While the Tobacco Control campaign, is estimated to have saved the economy £7.1bn; against an advertising spend of £49.3m between 1999-2004.
The paper proposes a series of universal definitions to ensure practitioners adopt the same terminology and outlines a 10-step process to help government communicators determine sensible and robust estimates of Payback - the absolute financial benefit delivered by marketing - and Return on Marketing Investment (ROMI) - the number of pounds of Payback delivered, less the cost of the marketing - for every pound spent. It also provides six key principles that should underpin this.
Done well, analysis of these measures can be used to not only better demonstrate the role of communication in helping deliver successful policy objectives, but also the real value to the taxpayer.
The study is thought to be the first of its kind. Developed in collaboration with two leading practitioners in the field of marketing evaluation, DDB’s Les Binet and Sarah Carter, it aims to stimulate discussion among government, the marketing industry and academia.
The report explains that while evaluation of the return delivered on investment by public sector marketing is currently carried out across government - and in some cases very well - it is carried out inconsistently in terms of methodology and approach. While not all communication interventions are suitable for a monetised approach, the authors argue there should be at least common, and, at best, universal, practice across government.
The authors recognise that the two most difficult steps in calculating Payback and ROMI are isolating the effects of marketing from the effects of other factors, such as legislation, innovation in public services and changes in the economy, and putting financial values on the outcomes.
However, the paper asserts that the majority of benefits to society can be ascribed a financial value. It uses real examples, such as the savings in treatment costs to the NHS from reducing smoking, and the reduced cost to administering the tax system from encouraging on-line self assessment; to demonstrate this.
COI hopes that, following feedback, the document will become the definitive guide on this issue for public sector communicators, in the same way as HM Treasury’s ‘Green Book’, which sets out the core principles on which all public sector economic assessment is based. It plans to create a summary and technical guide in the New Year.
Mark Lund, COI’s Chief Executive said:
“At a time of great pressure on public finances it is right to be looking closely at how communicators measure the benefits of what they achieve for what cost. COI has always looked to deliver value-for-money through cost-effective campaigns and marketing activity, but we recognise evaluation is a complex and evolving discipline. We hope that this paper stimulates healthy debate among experts, both within and beyond the field of public communication, on this issue.”
Editor, Les Binet added:
“We have been impressed and excited by the analytical rigour and professionalism of this project, and we feel that commercial organisations could learn a lot from the principles outlined in this report. Hopefully, this marks the beginning of a fruitful dialogue between our two worlds.”
The document can be downloaded from the COI website at coi.gov.uk/ROMI.
For further information, or to speak to one of the authors, please contact Katrina Whenham at COI on 020 7261 8915.
Notes to editors
* COI is the Government’s centre of excellence for marketing and communications. We help government and the public sector meet their policy objectives through procurement and delivery of marketing and communications services that achieve maximum effectiveness and deliver best value-for-money.
* This paper forms part of the Holistic Evaluation Initiative pioneered by COI, which aims to improve the ways in which government measures the effectiveness of its communications activity.
* To comment on the paper, you can join the debate online at coi.gov.uk/blogs/bigthinkers or email thoughts directly to firstname.lastname@example.org. The deadline for feedback is 6 January 2010.
* 10-step process
1. Map objectives to outcomes and check expected contribution
2. Identify stakeholders and set the scope of analysis
3. Plan to measure campaign outcomes
4. Measure the impact of the campaign
5. Put a value on the impact of the campaign
6. Calculate Payback at present values
7. Calculate costs at present values
8. Calculate Net Payback and ROMI
9. Understand Payback and ROMI
10. (Optional) Advanced Payback and RMOI
* Six key principles
1. Start with an understanding of what your campaign is trying to do and how it will work
2. Isolate the impact of your campaign from the effects of other factors
3. Make conservative but realistic estimates of the value of the impact
4. Be transparent; show all your working and list all your assumptions
5. Net Payback is usually more important than ROMI
6. Do not use Payback and ROMI to make decisions in isolation from other measures
* Further details on the editors and authors of this paper:
Editor: Les Binet
Having read Physics at Oxford and Artificial Intelligence at Edinburgh University, Les joined the Account Planning department at BMP (now DDB London), in 1987. He now heads DDB Matrix, the agency’s in-house econometrics consultancy. Les has played an important part in establishing DDB’s reputation for effectiveness, having won more IPA Advertising Effectiveness Awards than anyone else in the history of the competition. In 2004 he was elected an Honorary Fellow of the IPA, in recognition of his services to the advertising industry, and in 2005 he was Convenor of Judges for the IPA Awards. In 2007, Les Binet and Peter Field published “Marketing in the era of accountability”, a major study of the factors that influence marketing effectiveness.
Editor: Sarah Carter
Having been awarded a first in Human Sciences at Oxford, Sarah spent four years in marketing at Unilever before joining the then BMP (now DDB London) as a planner. Since then, she has worked alongside some of the best planners in the world across a huge range of brands and sectors. Sarah has a particular interest in new ways of understanding people (e.g. running DDB Grapevine - a “word on the street” panel of cabbies, beauticians and hairdressers and bar men). She has authored papers on a range of subjects for industry publications and won the Market Research Society Best Paper Award. She has also co-edited with Les Binet, more than 40 award wining IPA Effectiveness papers, helping DDB win Effectiveness Agency of the Year for a record four times.
COI author: Kevin Traverse-Healy
Kevin has been involved in communication and strategy consulting for over 30 years. Immediately before joining COI’s Strategic Consultancy in 2006, he was a strategy adviser to European Commission vice-president, Margot Wallström. He has since acted as an ‘international communication expert’ for a number of European evaluations, reviews and feasibility studies. He was previously a director of advertising and PR group Charles Barker; Traverse-Healy & Regester Ltd and the Centre for Public Affairs Studies. Kevin, who has an MA in Mass Communication from Leicester University, is a visiting communication sciences faculty member at the University of Lugano. He is a Fellow and past president of the Chartered Institute of Public Relations.
COI author: Matthew Taylor
Matthew graduated with a first in Maths from Lancaster University and University of Maryland and joined the Civil Service as an analyst in the Cabinet Office. He went on to work for Accenture as a management consultant, where his public sector clients included NHS Connecting for Health and the National Policing Improvement Agency. Matthew joined COI as a Strategic Analyst in 2008 and has worked on projects for the Royal Air Force, Department of Health, Government Equalities Office, Health and Safety Executive, Department for Business Innovation and Skills and the School Food Trust.
COI author: Charlotte Tullett
Charlotte graduated with a BA Hons degree in Geography from Oxford University. She worked in Account Management at Tequila before joining Tullo Marshall Warren as a Strategic Analyst. During her time there she managed research projects into audiences, sectors, macro and micro environments for a wide range of clients including Nissan, T-Mobile, British Airways and Sainsbury’s. Since joining COI, also as a Strategic Analyst, in 2008, she has worked on projects for Department of Health, the Home Office, the Department for Business Innovation and Skills (formerly DIUS) and The National Patient Safety Agency.
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