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Avoiding the Instant ROI Trap with Advanced Analytics

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Introduction

For years, marketers have been on the defensive when it came to tangibly demonstrating advertising’s contribution to financial metrics. Lack of data and the inherent complexity of the multi-touch path to purchase forced marketers to rely on softer advertising metrics and limited outcome analysis to the top of the customer engagement funnel. The prevailing logic was that advertising built awareness and brand, while promotion, pricing, sales and distribution drove conversion.

Then, with the proliferation of digital technologies, media consumption habits changed significantly, along with available data and metrics. The promise of accountability—explicit connection to sales and reduced waste through more precise targeting—led to significant shifts in the media mix. But that data has largely favored short-term goals, leaving marketers with an unbalanced set of metrics to drive marketing decisions and operations. In simpler terms, just because it’s measurable doesn’t mean it’s right.

As a result of today’s typical measurement and analytics practices, marketing is often undervalued and driven by an inefficient mix of tactics and programs. This is a costly impediment to business growth, but can be avoided with new analytical techniques.

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The Advertiser’s Strategy Today

As consumers spend more time on digital and mobile platforms, advertisers are (not surprisingly) shifting their investments to align with this change in behavior.

The increased use of digital and mobile platforms has unleashed a host of data and metrics promising to explicitly or algorithmically connect the effects of advertising to business outcomes and better target and reach relevant audiences.

Today, advertisers are using analytics capabilities like direct attribution, multi-touch attribution models or marketing mix models to demonstrate value and optimal allocation, further contributing to shifts in allocation.

These analytical approaches connect marketing to short-term sales response and demonstrate what appears to be high returns from digital tactics such as paid search and display advertising.

Additionally, programmatic buying is increasing as available data is leveraged on both the demand and supply side to support audience-based real-time bidding. Advertisers are embracing programmatic for its ability to target more relevant audience groups, drive higher conversion and eliminate waste.

So, on the surface, it appears that advertisers have finally cracked the code; they’re leveraging data to make optimal allocation decisions, reach relevant consumers with the right message and demonstrate the financial impact and return of their investments. But, despite the obvious advantages, there are limits to the current approach.

TV

10%

25%

40%

DIGITAL MOBILE

Source: IAB, Nielsen, ZenithOptimedia and eMarketer. Numbers on bars denote % change in share 2014-2015

TV

10%

25%

40%

% SHARE OF TIME SPENT

DIGITAL MOBILE

-12% -8% +100%

% SHARE OF ADVERTISING SPENT

-2% +4% +266%

AUTOMOTIVE

PRINT RADIO TV ONLINE MOBILE

FINANCIAL SERVICES

TELECOM

PACKAGEDGOODS

2.8

0.8

1.7

0.36

3.1

1.2

2.0

0.3

5.5

1.4

2.8

0.8

5.6

1.9

5.1

1.2

19.3

1.6

5.3

1.8

The Advertiser’s Strategy Today

Digital and Mobile Exhibit High Short Term ROI

Digital and mobile show high short term ROI based on Ninah MMM and MTA benchmark database. But when including long term effects of marketing the ROI picture is often more nuanced. Marketers need to analytically balanced highly targeted conversion driven tactics with tactics that feed the top of the funnel and build equity.

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The role of marketing is multi-faceted. On one hand, marketers must support and drive short-term sales. But, at the same time, they must also build strong brands that command pricing power and secure the demand for current and future customers.

Because current metrics and measurement techniques are frequently focused only on productivity gains and short-term sales, many advertisers are falling into the instant ROI trap.

In this scenario, returns may be initially high as a result of reaching consumers interested in a category and product with a promotional message. But without efforts to drive new interest in the category, brand and product, advertisers are targeting a small and ever-diminishing cohort.

To address this, not only do advertisers need to balance the use of marketing channels, they must also balance promotion vs. brand building messages.

“Without efforts to drive new interest...advertisers are targeting a small and ever diminishing cohort.”

PRECISE TARGETING

DATA-DRIVEN CAMPAIGNS

RETARGETING MESSAGING

LOW-COST IMPRESSIONS

SHORT-TERM BUYERS

GREATER EFFICIENCY NOW

MISSED AUDIENCE

UNCERTAIN PRICING POWER

HIDDEN SEGMENT VALUE

REDUCED BRAND EFFECTS

FEWER LONG-TERM BUYERS

UNREALIZED ROI

The Dark Side of the Short-Term Mindset

REACHED RESEARCHEDSHOPPED/

VISITEDBOUGHT

REPEATED/ ADVOCATED

The Dark Side of the Short-Term Mindset

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AUTOMOTIVE

SHORT-TERM MEDIA ROI

ROI INCLUDING LONG-TERM BRAND

EFFECTS

FINANCIAL SERVICES

TELECOM

PACKAGEDGOODS

3.2

1.9

1.8

0.8

5.5

2.9

2.4

1.5

Today, brand impact measures go beyond awareness, consideration and equity statements to include factors like experience and word-of mouth. Promotion, in contrast, is measured in short-term sales.

It is this lack of a common currency metric across these objectives (and customer segmentation) that prevents marketers from effectively balancing brand and promotion and ultimately contributes to the instant ROI trap.

The impact is significant: benchmarks show that by evaluating only the short-term impact in financial terms, marketers are undervaluing brand contribution and ROI by as much as 75%

Fortunately, new analytical techniques are enabling marketers to understand the interplay between brand and promotion, giving them the ability to express the value of each in terms of long-term sales and profit. This allows for more optimal coordination of each.

MARKETING BRAND EFFECTS

YOU NEED TO KNOW WHAT WORKS FOR YOUR BRAND – TODAY AND TOMORROW

LONGER-TERM EFFECTS

SHORT-TERM EFFECTS

BRAND MULTIPLIER

CUSTOMER EXPERIENCE SALES & ROI

Finding the Right Balance for Growth

Finding the Right Balance for Growth

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A Path to Advertising Success

Today, successful marketers are not satisfied with measurement for measurement’s sake. They understand that they don’t simply need data to drive and maintain a competitive advantage—they need the right data. By adopting today’s most advanced measurement and analytics practices, marketers can:

• More effectively and analytically balance branding and promotion

• Embrace digital and mobile channels without getting caught in the instant ROI trap

• Understand how channels can work better together to achieve specific media goals and audience segment priorities

• Uncover the drivers of both short-term and long-term ROI to inform strategic planning and allocation decisions.

To learn more about the new analytics techniques available to support the current and evolving demands of marketing, contact Ninah Consulting.

Ninah Consulting is a leading global professional services company, providing a broad range of marketing analytic services and solutions in demand strategy, data management, modeling, and activation.