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Definition of ROI

By Terry McC ·
I am looking for a good definition for ROI - Return on Investment. The gray area we are having discussion on is does a project that must be done to strategically keep up with the competion to provide the same service level have an ROI?

Example isclient needs to implement a call centre as competition is providing that value added service. Does this have an ROI and what does the ROI compare against,(do nothing and loss client sales?)

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ROI si multifaceted

by MallardtooXX In reply to Definition of ROI

ROI is a multi faceted term used to jell conflicting ideas into one large all encompassing vision. You already have the truest sense of ROI defined in your question. Your question:

"does a project that must be done to strategically keepup with the competion to provide the same service level have an ROI?"

The answer, Yes. Everything has a return on investment. If you buy a pack of gum for a quarter and chew all the pieces at once you have very little ROI, however if you chew 1 piece a day for lets say 17 days (the number of sticks in my big red pack) then you have higher ROI. The same in your question holds true. IF you have a project that must be done to maintain your position in the marketplace then you will have ROI. Now there are Two types of ROI; positive and negitive. The question you need to ask is is it cost effective? If the answer is yes then you will have strong ROI, if the answer is no then your ROI is prolly not going to be that great. If you aregoing to get buried by a competitor that has a service you do not then it is by all means cost effective to explore and possibly implement the system you are looking at. The return in investment you experience is staying on top of the heap and not getting swept to the bottom. Think of it as a cost of doing business and you justify a lower ROI, think of it as a cost of staying in business and your ROI jumps exponentially. I hope this helps.


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Well Said

by Oldefar In reply to ROI si multifaceted

A good explanation for ROI.

For the situation in question, it may help to go back to the business objectives and business requirements. Here is an example.

Objective - to control n% of the market share in (your industry). Requirement - meet or exceed service standards of our competitors.

This now changes the project from an ROI issue to an issue of cost effective implementation of a call centre. The technical objective has already been determined by the business requirement of meeting or exceeding competitive service standards.

Of course, if your company was considering doing this first than the issue would be ROI.

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