MARKETING INSIGHTS: Measuring the ROI of Multiple Marketing Drivers
by Bob Chernet
I suppose it doesn’t surprise me that a recent report noted that marketing effectiveness is now at an all-time low. According to the World Advertising Research Center “…The marketers surveyed said that 65% of their marketing spend had no discernible effect on consumers in 2007.” However, it goes on to say, “The report suggests the main cause of the waste can be largely attributed to lack of measurement…”
“Media clutter, sophisticated consumers and intense competition go some way to explain the wastage…(but) tracking every marketing dollar spent would mitigate the effect and feed critical real time analysis back into marketing strategies” it went on to say.
They covered a lot of ground here. Let’s examine how multiple channels, time and measurement play into the situation.
If the statement “no discernible effect on consumers” is true, how would they know if as they say they have not sufficiently been able to measure it? That’s been the core problem for marketers since the Stone Age; understanding what marketing actions cause a direct reaction. (And to further complicate things, there are various intended reactions - not all of them are outright purchases).
It is rare that one message delivered through one media will bring about an immediate consumer action. Short of a Super Bowl ad or a guy handing out flyers for lunch coupons on 6th Avenue in Manhattan at lunchtime, it’s going to be difficult to understand how an ad (or any single marketing driver) specifically affects behavior.
“Traditional” media has wrestled with this conundrum for decades. Magazines and newspapers relied on circulation figures, which were extremely general. They assumed readers saw the ads, but without some sort of tie-back (coupon, 800 number and the like), you really didn’t know if any eyeballs saw your ad. For that matter, they factored-in a “pass-along” percentage which estimated how many other eyeballs saw the magazine after the original reader passed it on. In other words, it was not necessarily a true reflection of who else saw the magazine and, hence, the ad.
Television was (and is) still wrapped up in estimates. The early days “diaries” (written accounts done by the honor system) drew from a representative sample of the viewing universe to jot down what they watched. Researchers made the assumption that whoever watched the show also watched the commercials. Radio measurement? Don’t even go there.
Things took a change for the better when the Internet held out the promise of being able to track the effectiveness of all online marketing efforts; and to a large degree it can. Specific tags and other mechanisms can be placed on virtually all online marketing drivers and followed through the path to online purchase (and in some cases telephone or coupon purchases). However, all the stars have to align just perfectly for that to happen. First, the company’s privacy policy has to allow such tracking if the sale consummates online and customer information is given. Secondly, a marketing message (driver), a purchase decision, and an actual transaction have to occur in a relatively short period of time. There are many and varied reasons for this, such as expired browser “sessions” and/or “cookies,” etc. Additionally, toll-free call centers have to be able to correlate incoming calls directly back to a driver (sometimes it can be a unique offer code), but that relies on the caller forwarding the code, when possible.
But for the moment, let’s assume that the Internet is the most measurable medium we have in terms of cause-and-effect. Many firms have made a solid business of connecting-the-dots between a paid placement campaign on GOOGLE, or a banner ad in a syndication network, and traffic to an online store. However, I submit that most marketing analysts are assuming that one driver equals one sale. That is, you see an ad somewhere, then make a purchase based on that message. Unfortunately that does not occur in real life. Often, marketing is the accumulation of messages that, once a need arises, a purchase decision is made and completed.
With today’s overwhelming collection of media channels, you can imagine how difficult, if not impossible it is to follow each and every marketing driver toward an ROI. Let’s look at an example:
A computer software manufacturer holds a seminar at a conference center that lets prospective customers “test drive” their product. Prospective clients learn about this seminar via a combination of direct mail, banner ads, and eMail blasts that the company has planned for in advance. Once at the seminar, users who like the software are given a coupon for a “seminar discount” to purchase a copy either at a local reseller, via toll-free 800 call center, or on the Web. The coupon is good for 90 days.
Can you spot the measurement dilemma? Which marketing “driver” would you say caused the purchase? The coupon they handed out at the seminar? If that was the case, the coupon would get all the credit and the ROI for the seminar would literally be zero. Same can be said for the banner ad or the eMail blast. How would you calculate and ROI if the user held-off cashing it in for 60 days? What would be optimal is a weighting of the relative importance of each driver (for that specific interaction), in combination with the duration between first exposure and purchase. Remember, time plays an important part here too. How?
Take big ticket purchases. I won’t run out and buy a car solely because I see a banner ad or a television commercial. As a consumer I must have a need (my current vehicle is old, ugly or unreliable), and a motivation (price, sales or rebates). Unless I’m Malcom Forbes I probably won’t buy a car on a whim. So it stands to reason that Honda can run all the banner ads or direct mail it wants to; but I won’t buy until I have a need and motivation. So, does it follow that all the marketing efforts Honda throws at me goes to waste? I think not. If those messages have convinced me that Honda is the brand I should choose, then when I’m ready to buy I’ll buy Honda. Can you track the ROI? I cannot.
In a perfect world you would follow each and every marketing effort and its contribution to the intended goal. But since such measurement is still difficult to track and hard to determine, it is no wonder that marketing executives don’t understand what the real problem is, and believe that some of their efforts have no discernible effect.
Agree? Disagree? Have a success story? Have a question? Share it with me at: bob_chernet@viewmark.com
View a complete list of Bob’s Marketing Insights articles.
© 2008 Bob Chernet
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