Are Marketers getting bogged down by ROI?
Invariably most management discussions on anything but the tried and tested, revolve around managers asking you about the ROI on a particular project, event or task. I spent most of my career in advertising and as far as I can remember the questions that were being raised in the 80s were about whether or not one could co-relate advertising spends with sales increases. For me it has been a search for the Holy Grail ever since. Many famous people elaborated on the correlation, including the well-known John Philip Jones, but I am not sure that the question remains fully answered even 30 years later. Probably his seminal work was ‘ When Ads work : New Proof that Advertising triggers Sales’. Speaking on the short term effects of advertising Professor Jones in his first chapter The Short Term Effects of Advertising says:
“This book provides strong evidence that advertising is capable of producing a pronounced effect on consumer purchases of a brand within a short period ( generally measured as seven days) after its exposure. This short term effect varies a great deal according to the advertising used. “
Professor Jones after choosing his words very carefully of course, goes on to recommend single source data as the secret to the Holy Grail. There is much research that discusses that advertising expenditures are not clearly linked to an increase of sales and profits. A link definitely exists, but it is difficult to isolate it from other variables that are present in all experiments. Having done a post graduate degree in Econometrics this is not an unusual situation. Pricing, distribution, stocking and other variables have overshadowed the role of advertising in affecting sales. In one white paper issued by Microsoft Advertising where they collaborated with BrandScience titled “ Exploring Digital ROI for FMCG Brands” the paper notes that
“ ..media activity contributes approximately 5% of all sales with the remaining 95% resulting from fundamentals such as stock, distribution and pricing (in-store/on pack promotions).”
To some degree mainline advertising has been saved from more gruelling questions on ROI thanks to media modelling, GRPs, pre and post ad testing and tracking researches ( now common in the marketers armoury ) which gives the marketer some sense of comfort on what he is doing.
Marketers seem to be asking the same questions of digital marketing and advertising that they were asking of mainline media advertising three decades earlier. Almost no client meeting is possible without throwing those two famous words ROI and KPI into the discussion. The internet is reputed to be a quantifiable medium but advertisers are still dissatisied with the tools available to them for evaluating its performance.
What is the ROI? What KPI’s did you have? It is difficult to have any intelligent conversation without these two words interrupting your flow of thought. I think those two words could easily destroy all great ideas and any innovative thinking. In earlier days, we used marketing and advertising research in much the same way. Nothing would pass unless, an ad had passed the test, so to speak. This took the responsibility of producing good advertising from the marketing head and thrust it on the research agency’s head. If something went wrong, the research could always be blamed. If it went well, marketing would be applauded anyway, so why worry.
Some of the key questions that marketers are asking about digital advertising seem similar to the questions being asked about advertising in the past.
•Which media mix should be used to achieve an optimum communications strategy?
•How can digital media be most effectively combined with other media?
•How do online communications influence a brand’s image
•How can the impact that online advertising has on bricks-and-mortar distribution networks be measured?
Digital marketing is constantly evolving and rapidly changing. It’s full of new technologies, new tactics, and new innovations. Yet there’s one constant: accountability. There’s an expectation that no matter how new, how cutting edge, how experimental or untested, it will all be perfectly measurable. And if it can’t be measured unfortunately no one has the guts to say ‘lets see how it works out’ or ‘lets do a pilot’ or ‘ lets find a primitive way to measure it if none exists’.
The reality is all digital marketing is and always will be measurable, but not always along traditional lines. And you can’t always measure what you most want to measure. Analytics can reveal lots of insight, but there’s a staunch resistance to accept that the exact knowledge desired might well be similar to reading tea leaves rather than spreadsheets and dashboards.
So in many ways we have full circle. And I can’t help feeling that questioning ROIs and KPIs for every little task that a manager has to do might well in the long term have pretty severe and paralysing effects on the right brain — the seat of our intuition.
I laughed recently when I heard that a client had told his agency that he wanted 10 million views from an advertising video of 3–4 minutes launched on youtube. I thought, what is 10 million views supposed to mean? How foolish? What about engagement? What about the how many seconds of the video was watched? What about likes and comments and other metrics? How can a marketer be so dumb as to just ask for 10 million views?
But maybe I was wrong. A simplistic KPI like 10 million views is a lot easier than a marketing head saying, how did this digital campaign affect my sales? In retrospect it is the more difficult question without a clear answer right now.
Connect with me on twitter