The small business owner who has just spent $100,000 on a radio campaign and the multinational who has invested $50 million in marketing in the past 12 months have the same question: How do we know our investment has worked?
Marketing measurement is becoming a much debated topic at businesses big and small. Finance heads often see marketing as the largest cost line in a business’ profit and loss statement. Marketing heads see it as the biggest investment an organisation can make to drive growth. And both want to know it’s money well spent.
The most obvious marketing measures are sales and profit. After all, marketing was created to help companies increase their sales. Overall sales and profit results related to a short-term campaign are relatively easy to measure. How much did we spend on marketing, what incremental sales occurred, and at what profit margin?
The challenge is at a more micro level. In today’s complex marketing environment, how do you determine which parts of a campaign effort drove the best results. Was it the drop in price, the new distribution channel, the repackaged product, the new brand ad, the promotional ad, the sponsorship, the email, the new website, the media strategy, or a combination of the above? Or was it external factors such as the weather or a government tax incentive? And if it was the media strategy, which media channel was it? TV, digital, outdoor, radio, press, social media, or again, a combination?
The latest research into the most effective campaigns at the annual Cannes Lions festival show they used on average a combination of just over 10 channels. That’s a lot of channels to sift through to determine which to attribute the hierarchy of success of a campaign.
Thankfully a number of media attribution tools are available. The software is often AI or econometrically driven. It figures out the channels that are engaging more successfully with the target audience and recommends switching from those that aren’t. In the case of programmatic media and search, the AI won’t just recommend, it will use machine learning to automatically make the changes. It will do the same if you are using a number of different creative ads in digital media.
At a broader marketing level beyond just media and creative , marketing attribution software can also help determine the optimal marketing mix in real time. Agency groups, and consulting and accounting firms, provide advice, partnering with a growing group of marketing attribution software platforms. Putting all these into an econometric model then allows marketers to plan scenarios for future campaigns. If the marketing budget increases, where should it be invested? If it is cut, what is the best way to rework the marketing plan?
Accurately measuring marketing relies entirely on the data captured. Every ad and every media placement needs to be tagged and analysed, as do website pages, customer emails and social media channels. The customer database needs to be robust and up to date. Factors such as price, product and distribution changes must be inputted. And when it comes to the analytics, the company needs to determine whether to give extra weighting to the last marketing touchpoint that led to the customer making a purchase or equal weighting to all of the moments along the path to purchase.
The final task for marketers, CEOs and boards is to ensure the long-term drivers of sales and profit success are taken into account. The temptation with real-time marketing measurement is to only analyse what is happening in the short term and dismiss some longer-term drivers. Both McKinsey and the Institute of Practitioners in Advertising (IPA) have recently done studies analysing effective marketing campaigns over the past 15 years. They show that long-term campaigns outperformed short-term ones significantly: short-term campaigns drive spikes in sales rather than build sales like long term campaigns do. The IPA report concludes it is not an either/or; there’s a 60:40 ratio for the most optimal results.
The study found the key driver of the success of long-term campaigns was brand building, so it’s essential that brand measures in regards awareness, consideration, and engagement are also in place. But it’s also critical that these measures are incorporated into the attribution or econometric models. There’s no point a marketer spruiking that web page views and social media followers have increased off the back of the brand campaign, if there is no correlation to longer term sales and profits.
Whether a business is doing short-term or long-term campaigns or both, measurement is imperative to ensure the marketing team has the data and insight to optimise their decisions.