Most ad agencies and clients want to create great advertising. Unfortunately, despite Clios and Superbowl polls, great advertising is often difficult to define.
Or is it? What direct marketers understand — and brand marketers are seemingly still learning — is that there is an acid test for great advertising. Great advertising provides a positive ROI, and having the systems and processes to measure and optimize this return is critical for success.
The steps to great advertising are easily stated.
- Build the systems and process to determine campaign ROI.
- Set a baseline for performance.
- Test alternatives to current efforts.
- Do more of what works and less of what doesn’t.
But taking these steps requires some effort.
Direct marketers are experienced at tracking the specific marketing KPIs (key performance indicators) that drive return on marketing spend. They follow consumer activity from the marketing interaction through to an ultimate sale by using promotion codes and trackable response mechanisms — e.g., different 800 numbers — and use detailed customer databases that allow them to tie multichannel customer interactions (e-mails, catalogs, phone calls, Web site visits) to sales.
These tools enable them to reliably determine the ROI of a marketing program at the component level (media, target segment, creative, response channel, etc.) and to optimize efforts. With this economic visibility, direct marketers are able to test new components and determine what is working and what is not. This in turn provides a simple optimization rule for constantly improving marketing results: Expand profitable marketing efforts and eliminate what is not working. In DM speak, “test and roll.”
The result? Great advertising.
While brand marketers face a different set of challenges, the basic principles of great advertising can be applied to brand efforts, and should be. According to the February 2010 Duke/AMA CMO Survey, “When asked what question they would like to ask other CMOs, ROI concerns dominated.” Unlike direct marketers — who typically know with precision who received a specific marketing campaign and who responded to the campaign — brand marketers have a more difficult time linking marketing efforts to sales. Challenges include:
- Limited visibility into who actually saw a marketing program
- Longer time between marketing and sale
- Multiple simultaneous marketing messages reaching a consumer
But there is a solution.
The marketing sales funnel provides a roadmap for branding key performance indicators. The concept here is not new. As far back as the 1960s, thinkers such as Russell Colley were developing models like the DAGMAR model to understand marketing effectiveness. The idea is to combine each step in the sales funnel (according to Colley, these are awareness, comprehension, conviction and action) into a formula for sales and therein determine ROI on marketing efforts.
Using market specific tests, brand marketers can figure out the baseline conversion rates for each step in their sales funnel and therein a reliable model for marketing ROI. For example, by running two independent campaigns in two demographically similar markets, a brander can determine the reach and frequency achieved by the specific media to estimate total impressions (i.e., the number of consumers aware).
Then, using traditional survey methods, the advertiser can determine the percentage of users aware of the brand who understand the value proposition (% comprehending) and the percentage of users who comprehend the value proposition who were convinced by the value argument (% convinced.) Last, by tracking sales levels in the test markets the advertiser can estimate the conversion rate of convinced potential customers to those taking action (% acting).
Combining this data, the advertiser creates a formula for linking marketing to sales. Number aware X % comprehending X % convinced X % acting = # of sales. Because the cost of the media and the value of the sales are known, the ROI of the marketing effort is easily determined. With a baseline established, the brander can modify components of the campaign (i.e., the target segments, the media mix, creative, etc.) in one of the two test markets to determine which components work best and then use them to improve the ROI of their marketing campaigns.
Front of the Line
For a long time, direct marketers have been relegated to also-ran status in the marketing world. Despite making millions on Ginsu knives and Pocket Fisherman using sophisticated analytic techniques to test and perfect the economic performance of their advertising, the direct community was the Rodney Dangerfield of marketing. As Internet advertising has come to the fore, helping to make all advertising more accountable, and economic realities have demanded a greater focus on marketing efficacy, it makes sense to give the direct world and their emphasis on ROI its due.
Great creative is memorable. “Plop Plop Fizz Fizz…” still conjures memories for those of us born before 1980, and you probably know “what a relief it is” when you as a client get it. But what the direct marketers know, which brand marketers would be wise to embrace, is that great creative alone is not enough. If advertising is memorable without delivering ROI, “Where’s the beef?”
Jonathan Shapiro is CEO of MediaWhiz.