2. The Return on Investments in Analytics

Keri E. Pearlson

Deciding to invest in an analytics project and then evaluating the success of that investment are complex processes. Often the decision is complicated by the complexity of the project, the time lag between the investment and the realization of benefits, and the difficulty in identifying the actual costs and actual value. However, most go/no-go decisions are made on the basis of a calculation of the return on investment (ROI), through either a formal ROI calculation or an informal assessment of the answer to the question “Will the value be greater than the investment?” The objective of this chapter is to summarize the traditional approaches to calculating ROI and then to describe a particular ...

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