ROI is a mindset, not a measurement.
I once heard someone say, "Brands are created for the single purpose of making money." As cynical as that may sound, I couldn't agree more.
Brands aren't created for philanthropy; they're created to generate revenue for parent companies or, in some cases, to deliver shareholder value. The business mantra "sell, sell, sell" is inherently engrained in brand creation and sustainment. Brand awareness, preference, and loyalty are all great guiding tools to develop and grow a brand, but brands that fail to deliver financial gains, regardless of how strong they're perceived to be, inevitably risk extinction.
As revenue-driven entities, brands must both efficiently and effectively understand the sales path and how to optimize revenue output with sales insights. This is precisely why marketing is more closely monitored and scrutinized overall.
With online leading the pursuit of higher marketing ROI (define) and accountability, behavioral targeting can connect a backend purchase to the front-end targeting. That can improve effectiveness and efficiency and optimize cross- and up-sell opportunities.
Before or After: Every Action Has a Price
There are always observable actions leading up to a behavior. From a marketing ROI perspective, this means there's a consumer journey with an identifiable path that leads to the transaction (e.g., purchase or registration) and beyond.
The only difference between a branding campaign and its direct response counterpart is the time required to drive a sale. Branding implies establishing a longer-term relationship with current and potential customers who will eventually purchase the branded product. Direct response focuses on immediate sales and results.
When it comes to deploying ROI-focused marketing, brands must clearly define all steps that ultimately contribute to a potential sale and assign a distinct value to each action to ensure ROI metrics are in place every step along the way.
For one client, we're developing a cost-per-contact system that will attach a monetary value to every contact (or action) consumers have with the brand. Contact, in this sense, is a broad terminology, including more quantitative and trackable actions such as CTRs (define), duration of stay per page, number of pages visited, and ultimately, online purchases or proxies of purchases (purchase intents).
In addition to these standard metrics, we're also devising a visit quality index. Enlighten CEO Steve Glauberman defines it this way: It's a weighted composite of measures, such as key interaction rates, conversions, content paths, visit frequency, and more. Beyond individual measures such as Web site traffic, online leads, and configurations, a visit quality index is an important snapshot of performance in terms of driving shoppers to the site's highest value content and tools.
Learning From the Behavioral Targeting King
In June, Target broke into the credit card business. It's the only retailer among the top 10 credit-card issuers, and perhaps the least likely to be joining card companies such as Chase, MBNA, and American Express.
Target chose to do the opposite of what failed retailer-turn-credit card companies such as Sears and Federated Department Stores tried. It maintains control over the customer message and communication platform. It monitors all contact points, creating a closed-looped system. This allows the retailer to not only capture data but also develop marketing programs specifically tailored to card holders based on their previous purchase history.
Target can track RFM: recency (how recently a consumer shopped the store), frequency (how often), and shoppers' monetary values based on average transaction amount and many other purchase-behavior-related data. This is perhaps the most sophisticated behavioral targeting in real life.
What Does This Mean for Online Media?
In a 2005 survey conducted by Marketing Management Analytics (part of Aegis Group), the Association of National Advertisers, and Forrester Research, 60 percent of senior-level U.S. marketers said defining, measuring, and taking action on ROI is important, but only about 20 percent expressed satisfaction with their ability to do so.
Furthermore, 73 percent reported a lack of confidence in understanding a marketing campaign's sales impact. In an environment with increasing ROI importance and rising media costs, marketers must better understand multimedia behavior to reach the target consumer in a respectful manner, at a receptive moment.
Marketing is playing out in fast-forward. Insights must be made on the integrated data points that take into account all today's communication methods, plus consumer data identifying who buys what and why.
The marketing ROI philosophy requires changes in organization and processes to optimize marketing activities. Rather than ROI measurement, it should be ROI management. It's a mindset, not a measurement.
Said Procter & Gamble's Bernhard Glock, manager of global media and communication, "The ground has been laid for a common currency with which to understand consumer behavior beyond demographics. Only by understanding consumer behavior can we ensure that people receive the right information at an opportune and welcome moment."
Long gone are the days of using brand preference and purchase intent as campaign success metric. In today's ROI-driven world, marketing optimization is all about demonstrating the contribution of marketing tactics to a final sale.
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Based in London, Andy Chen is vice president of digital solutions for Viacom Brand Solutions(VBS) International. Prior to Viacom, Andy was the media strategy director at Carat International/Isobar, which handles global media and digital strategies for Philips, Renault, Adidas, and various other multinational clients.
A true advocate for global integration and strategy, Andy has lived and worked in Copenhagen and Stockholm, where he was a management consultant for the Swedish Advertising Association. He received his BA from University of California, Berkeley; and a MBA in international marketing and global management from Stockholm University, School of Business. Named one of the "20 Rising Media Stars to Watch in 2004" by "Media Magazine," Andy is a frequent international conference speaker on digital and interactive media. He published his first collaborative book, "The Changing Communication Paradigm," in November 2005.
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12:00pm ET/9:00am PT