The ROI of Your Mother

Most business is probabilistic, but investors and sometimes companies do everything they can to pretend that it’s deterministic. Every spreadsheet contains mostly information from the past, which we pretend has some wonderful predictive value. But it really doesn’t.

Gary Vaynerchuk, the Founder of Vayner Media, is an entrepreneur, motivational speaker, business coach and investor. He’s also known for being brash, profane and has been accused of being a charlatan. His videos and podcasts are entertaining to say the least.

Years ago, Gary was in a meeting with a conservative CMO of a large company, who kept grilling him on the ROI of social media. This was around 2012 when we didn’t yet know the impact of capturing attention nor was the widespread use of social media ubiquitous in terms of companies directing their marketing dollars to various platforms. However, there was plenty of anecdotal and even some data driven metrics to point out regarding its usefulness. Yet, big companies, slow to change and adapt, kept funneling marketing dollars to print and linear TV.

The CMO kept grilling Gary.

What’s the ROI of social media?... What’s the ROI of social media?...

Finally, Gary turned to her and bluntly asked: what’s the ROI of your mother?

Once the CMO moved past her confusion, Gary explained.

"…the ROI of my mother is everything everything. The reason I'm going to buy a multi-billion dollar sports franchise is because of my mother. My mother the way she parented me which, oh by the way is perfectly, is the reason I have the ability the confidence and absolute wherewithal to execute the businesses that I'm building. However my friends at Inc. 500, I cannot come to you with slides and put them on those screens and say over here, click, in sixth grade when I got a mullet you know and my mom said I was gorgeous and beautiful and I could do anything, well that was building self-esteem, and so what I did with that on the next slide is you'll see here I sold a couple more cases of wine in 1994 because of that self-esteem which led to this and now…I can't show you. I can't show you in data the ROI of my mother. But I promise you it's all of it. The whole kit and kaboodle."

The context of that quote was referring to social media, but it can also refer to giving businesses permission to spend money on low ROI, high customer satisfaction endeavors that have enormous non-monetary value. 

Say what you want about Gary, but I thought his story was both funny and informative.

Businesses do things all the time that can’t be measured but are incredibly valuable. Especially consumer facing businesses that often have the mission of delighting customers. These things often cost money, with no corresponding line for them in a spreadsheet. This makes them difficult to measure, and likely understates their importance to a business. Remember, probabilistic versus deterministic. 

If a business spends money on acquiring customers, they can see whether it’s working very quickly. They can say ‘we spent X and the value of customers we acquired was Y’.

Now let’s say a business wanted to make a corresponding investment in customer service or customer loyalty, ensuring customers were delighted, resulting in a great experience and incentivizing them to purchase their product or service again. Money spent here is likely more cost effective than acquiring customers directly. However, it will likely take years before you can prove the effectiveness of that loyalty spend, if at all. Making decisions through this lens, despite any short-term negative effects, is more often than not the right way to approach things. Get a customer’s attention in a positive way, then worry about ROI.

This is not just a theoretical discussion.

I recently traveled to Houston and stayed at the Hyatt Regency downtown. Each day around lunch time, Hyatt put out a table of individually wrapped, freshly baked cookies. Sugar, chocolate chip, oatmeal raisin. There was a hotel employee standing near the table smiling and encouraging guests to take some. I saw that small gesture brighten people’s day. The cookies were delicious, and I even heard a guest thank the hotel for doing that upon checkout. What’s the ROI on those cookies? Does Hyatt monitor some ‘cookie related spend’ KPI? Does a guest who takes a chocolate chip cookie spend more per night at the hotel? Are there repeat visit metrics based on cookie consumption? Of course not. It’s impossible to measure. But it get’s people’s attention and makes their day a little better. 

AO.com, a UK-based appliances retailer, has a system where during each appliance delivery, if there is a child present or the family has children, the technician will hand out a teddy bear with the AO logo on it. What’s the cost/benefit analysis on that teddy bear? Do customers tip delivery drivers more often after receiving the bear? Do teddy bears drive pricing power? It’s impossible to measure. But it gets people’s attention and makes their day a little better.

Chewy.com sends customers on auto-ship subscriptions for pet food, flowers and a card when their pet passes away. There is a real cost to that spend. Yet, given most pet owners will have multiple pets during their lives, I’d imagine they never order pet food from another company after that. Massive brand loyalty is created with that single gesture, while at the same time generating a negative short-term ROI.

Rolls Royce puts a custom-made umbrella in every car they manufacture, hidden in the rear passenger door. I’ve seen estimates for the cost of this umbrella and compartment to be around $10,000 per car. Rolls Royce manufactured over 6,200 cars in 2024, meaning it’s possible that umbrellas alone are costing them over $60mm dollars per year. This extra cost could be eliminated by the time you’re done reading this post. What’s the ROI on umbrellas? Yet, Rolls Royce owners (and non-owners!) are delighted by this feature, and it helps build brand value. 

Attention first, ROI later.

Companies (and investors) have to make judgement calls using unknowable information. The cost of the AO teddy bear, Hyatt cookies, or Chewy flowers may not be trivial, but the long-term effect is likely to be very good. I know where I’ll be staying the next time I’m in Houston.

As a result, an overreliance on financial metrics runs the risk of ruining these customer enhancing initiatives. Just because something is not quantifiable, or there appears to be negative value up front, doesn’t mean it’s a mistake.

Finance tries to reduce everything to a number. What’s the ROI? How will this affect margins? What does this mean for next quarter’s earnings? The shareholder value movement along with quarterly reporting has put short-term measures way ahead of long-term brand building. Not because the short-term results are more valuable. They aren’t. It’s because they deliver measurable results faster.

Most businesses should be making decisions in accordance with long-term brand building. From an investment perspective, analyzing companies involves both primary work along with faith that the right decision is being made by the company. Yet, there are signs that investors can pay attention to surrounding long-term brand building. 

Amazon is an excellent, and perhaps the best example. Bezos letters to shareholders read like an exercise in long-term thinking. In the prologue of The Everything Store, Bezos explains how Amazon is different. 

“We are genuinely customer centric, we are genuinely long-term oriented and we genuinely like to invent. Most companies are not those things. They are focused on the competitor, rather than the customer. They want to work on things that pay dividends in two or three years, and if they don’t work in two or three years they will move on to something else. And they prefer to be close-followers rather than inventors, because it’s safer. So if you want to capture the truth about Amazon, that is why we are different. Very few companies have all of those three elements.”

In fact, page one of Bezos’ 1997 letter to shareholders contains the following:

It’s All About the Long Term

We believe that a fundamental measure of our success will be the shareholder value we create over the long term. This value will be a direct result of our ability to extend and solidify our current market leadership position. The stronger our market leadership, the more powerful our economic model. Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity, and correspondingly stronger returns on invested capital.

Our decisions have consistently reflected this focus. We first measure ourselves in terms of the metrics most indicative of our market leadership: customer and revenue growth, the degree to which our customers continue to purchase from us on a repeat basis, and the strength of our brand. We have invested and will continue to invest aggressively to expand and leverage our customer base, brand, and infrastructure as we move to establish an enduring franchise.

The second page is just as important:

We will continue to focus relentlessly on our customers.

We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions.

We will continue to measure our programs and the effectiveness of our investments analytically, to jettison those that do not provide acceptable returns, and to step up our investment in those that work best. We will continue to learn from both our successes and our failures.

Fast forward 28 years later and you can see that he wasn’t messing around. This philosophy is still in place today. 

Last Christmas I was gifted an Amazon gift card which came in the package above. A gift card holder shaped as a small Amazon delivery van, with wheels that work, and the gift card inside. I love small, insignificant details maybe more than the average person, but this should blow anybody away. This is one of the coolest and most thoughtful designs I’ve ever seen, especially to hold something so insignificant. Another way that Amazon goes out of their way to delight their customers. My son plays with the truck. Like the examples above, Amazon could save a few bucks by eliminating the gift card holders, but instead use this as an opportunity to showcase their creativity and again, delight customers. 

That’s not all. Nearly every important initiative that customers love about Amazon was a non-obvious, non-quantifiable investment in long-term brand building. Many employees hated the ideas of Amazon Prime and Prime Video. Amazon Web Services probably wasn’t an easy sell to Amazonians. The Kindle was thought to destroy the core book shipping business. Engineers, or people who work in finance need to measure everything precisely. How do you measure customer satisfaction?

In the early days of Amazon, employees, even Jeff Bezos himself, wrote thank you notes to all customers that purchased a book from the site. How do you measure the return on that time spent? Yet, it kept customers coming back. Imagine if Bezos had listened to his team, or analysts, or run Amazon in a way that tried to smooth or cater to short term quarterly results? He would be much less wealthy than he is today, and we would be worse off as customers.

The lesson should be obvious by now. Customer delight cannot be measured, but is just as important as the things that are measured.

So for both companies and investors, with all of this judgement involved, how can we ensure that we don’t invest behind a company claiming to make investments in customer loyalty, when they are actually destroying tons of value?

Look for companies that are trying things. Experimentation in the name of the game. You want companies that are trying what I’d call low ROI, but high probability tactics. 

Giving away product for free. Loyalty programs. Membership discounts. Free teddy bears. My favorite t-shirt company offers discounts in the checkout area of the website, right before clicking ‘Submit Order’, you’ll be given the option to add on a T-shirt for -25% off and free shipping. That’s creative. 

Importantly, if these initiatives don’t seem to be adding any value or improving customer satisfaction, they can be halted or eliminated without damaging the brand or the business. Recalling the Amazon example, like the two-way door framework pioneered by Bezos. 

A one-way door decision would be deciding to build a huge factory or distribution center to be closer to the customer or lower costs. That decision is difficult to walk back and requires a certain degree of rigor, decision making, analysis etc.

A two-way door decision is an initiative you can try and then stop if it’s not working. And the trial part will likely cost less than the company would have spent trying other things.

KITS Eyecare is an example of a business that tries things. They’ve built a better mousetrap for manufacturing eyeglasses. To build brand awareness and attract customers early in their lifecycle, they offered free glasses. Your first pair of glasses was free, up to $25.

They also just rolled out a subscription / loyalty program, KITS+, whereby a $50 annual subscription gives customers access to upfront product discounts along with discounts on repeat purchases and lens replacements. Based on KITS current unit economics and gross margins on eyewear, along with the monthly cost of the subscription, I’d imagine they are losing money on the first, if not first few purchases a customer makes as a KITS+ member. Yet, they are driving long-term brand value, repeat customers and a better customer experience. This is a two-way door decision. If it doesn’t work, they can just stop. 

Today, it’s as easy as it’s ever been to get people’s attention, and as difficult as it’s ever been at the same time. That strange paradox means that companies need to get creative with marketing in non-traditional ways, and ways that don’t require massive marketing spend. Small gestures of kindness and conscientiousness have unknown short-term ROIs, but enormous long term ones. Similar to the ROI of your mother.

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