What is your ROI on producing marketing content?
By John Toepfer
Most investment management firms these days are partially or fully automating their marketing content production. A few firms still do this manually (read: painfully), but despite their current process most firms want to take full advantage of automation to further streamline their process. The question becomes, “If we buy technology and services to improve our process, will we really see an ROI?” When justifying the cost of marketing content automation, building an ROI calculator can be extremely helpful to gain stakeholder buy-in and budget approval.
In order to create an accurate ROI calculation, the critical first step is to understand your true organizational costs of producing your content today. Very few people know how to really measure the full organizational costs associated with the communication operations at a company. In most cases, people simply look at their departmental head-count (FTE) cost and guestimate what percentage of their time goes into updating and distributing content and literature. This broad brush approach would seem to capture the costs well, but often underestimates your true costs — sometimes severely. A full accounting of the cost of your current processes should take into account direct labor costs, managerial labor costs, opportunity costs, and error and risk-related costs.
We’ve had two clients undertake a full and detailed Six Sigma cost analysis of their baseline costs and risks associated with manual or semi-automated literature production. The results were staggering.
The Six-Sigma Analysis
One client, who at the time was producing only about 60 quarterly factsheets of various types, was shown the potential to save nearly $44,000 per quarter due to increased efficiencies and reduced labor and staffing burden. That figure included the cost of adding a high-end automation platform. No, their team was not huge and their process was not bloated. This cost figure came from understanding every single touchpoint, discussion, meeting, review, re-do, and late hour put into their literature maintenance. It also quantified the opportunity cost of other work that could be done if literature production wasn’t hanging over the team’s head. (It did not, however, take into account the estimated cost of FINRA-levied penalties potentially charged for errors or compliance issues.)
Without conducting a full six-sigma analysis of your organization, we can provide some rules of thumb and simple formulas to help you establish your baseline departmental costs with a more comprehensive set of considerations.
Direct Costs (DC)
To get your full enterprise costs for producing content, you must first calculate your direct costs.
Calculating direct costs (DC) is based on two factors:
1) The number of Full Time Employee (FTE) equivalents required to produce your literature.
We’ll label this FTE count as “X”.
2) The average fully-loaded cost of these staff members. We’ll call this average staff-member
Counting staff members is easy; calculating the percent of their time goes into literature production
and maintenance is much more difficult. Most managers will underestimate this percentage as it’s very easy to overlook all the time and energy costs such as distractions, task switching and even employee turnover. That being said, we recommend skipping the percentage guestimate and using the following rule of thumb ratio we’ve developed though observation of a large sampling of asset management companies: In a non-automated scenario, we recommend considering at least 1 FTE per thousand pages of product literature produced annually.
If your ratio is below this, then you probably either have some automation in place, have very simple documents, or are working your staff out the door. Note that these are not full time positions for literature maintenance. There may be 4 people on your staff, but they all work part time on literature, the accumulation of all that part time effort should make up about 1 FTE per thousand pages as described above. Also, don’t forget the designers and other production team members who may be outside your department head-count. Those resources are factored into this ratio as well.
Fully-loaded cost for marketing team members is variable, of course, but you’ll need to be sure you include full labor and overhead costs in determining this cost of labor. We recommend averaging the salaries of the team members (not including management) involved and then multiplying that figure by a factor of between 1.38 and 1.45 in order to estimate their full cost including benefits, bonuses, staff management, overhead, office space and recruiting/HR costs. (At some companies in expensive labor markets or with high overhead costs, this ratio can easily be 1.5x. In Europe it can be 1.7x or higher.)
So, to calculate the Direct Costs (DC) associated with literature production simply use the formula X * Y = DC. For example, at 1 FTE per each 1,000 pages, if I have 2,400 pages, I’m likely devoting 2.4 FTE-equivalents to literature production. If my average fully-loaded annual cost per marketing FTE is $112,000. So, my annual DC direct costs (DC) are 2.4 x $112,000, or $268,800k per year.
Indirect Costs (IDC) or “Hidden Costs”
Next comes the more hidden cost element: indirect costs (IDCs).
IDCs are the amount of management time, opportunity cost, extra-departmental and intangible costs that go into planning, proofing, reviewing, checking and re-checking materials and re-doing things at the last minute. Think of all the planning meetings and discussions about the team and process at a higher level. Think of every team meeting, hallway conversation, phone call, discussion with compliance, late night fire-drill and scramble caused by an error. Think of the costs from the IT team, accounting, and temp staff. Consider the costs of the data analytics teams which provide you with numbers and then your own team’s costs in gathering and checking those numbers. Think of the time running back and forth to get corrected numbers. Think of all the work that simply wouldn’t happen if the literature didn’t exist, across the whole company!
As a rule-of-thumb, we recommend putting your indirect costs at 60% to 80% of the DC. So, yes, close to double your base-line assumption about what literature production and support is costing you. Sometimes, in a larger enterprise or a business with complicated products or strategies, this IDC can be well over double the DC costs. I know companies that don’t make a move in planning or dealing with documents and compliance rules without five meetings with ten people in each. So while these rules of thumb may not be precise, it represents a true and valid framework from which to quantify your overhead costs in supporting marketing document production.
Your True Cost Formula: FEC = DC + IDC
Once you’ve determined your direct and indirect costs, you have what you need to calculate your true operational cost: Full Enterprise Costs (FEC) = Direct Costs (DC) + Indirect Costs (IDC)
For example, if my DC was $268,800 per year, and I calculate my IDC conservatively at 60% of this ($161,280k), then my FEC of supporting 2,400 pages of literature is $268,800 + $161,280 = $430,080 per year (not including any print and fulfillment costs).
While we’ve made some assumptions in developing this formula, (and you can alter it for your circumstances) we recommend not underestimating your true cost of operations. Individuals evaluating technology purchases routinely minimize their current operating costs or in other ways create estimated facts to suit their personal bias. If you under-represent your cost of operations, you’re going to find yourself atoning for these decisions when reality hits. Don’t be afraid to represent true costs; it will be important when you go to build an ROI justification for a content automation purchase.
In this blog post, we’ve discussed the first step to building an ROI calculation for content automation, calculating your true operational costs today. For a detailed walk-thru of the three-step process to building an ROI calculator to justify a marketing content automation solution, please request a copy of our white paper: How to Illustrate ROI on Content Automation.
Here are some related resources that might interest you:
From the Blog:Key Takeaways From Our 2018 Factsheet Production Study
From the Blog:The 3 Ways to Approach Content Automation
From the Blog:3 Factors that Complicate Fact Sheet Automation