I was recently asked about the relative ROI (define) of different advertising channels - from TV, print, and radio, to direct mail, e-mail, and banners, to search ads, social media marketing, and location-based and mobile marketing. In comparing these diverse channels, it became clear that they really couldn't be compared easily because the types of metrics were all different and measuring different things.
Let's take a closer look at these metrics, grouped into three buckets: 1) push advertising - approximations of reach and frequency, 2) direct response, and 3) pull marketing - user-initiated ads.
Push Advertising: Reach and Frequency - Dead Metrics Walking
All the forms of advertising which are one-way - TV, print, radio, newspapers, outdoor - have metrics that are based on reach and frequency (rough estimates of how many people may have seen the ad). But most ad men and women know that people don't watch ads. Take TV ads for instance; viewers go to the bathroom during commercial breaks, get a snack, do e-mail, etc. or just TiVo past them. Print, radio, newspapers, and outdoor billboards suffer under the same "dead metrics walking" - estimates of circulation, listenership, and "the opportunity to see." Even the new Eyes On initiative by the outdoor industry approximates only the number of people "likely to see," not whether anyone actually saw.
By measuring only how wide a net was cast, and continuing to ignore how many fish were caught or even whether there were any fish in the vicinity, these metrics are prolonging wasted advertising dollars when far better tactics and metrics exist. Furthermore, telling advertisers the size, color, and gender of the fish (i.e., demographics of readers) doesn't matter if you don't know whether any fish were present. The circulation of a magazine isn't the same as how many people turned to a particular page and looked at an ad for more than a fleeting second - when was the last time you did that and what was the last ad you remember? Imagine if it were possible to measure how many people actually saw the ad. The paucity of those numbers is sure to be eye-opening or eye-popping, and advertisers may run away.
Direct Response: The Fish Call You Back
If push advertising were like casting a net, then direct response is like rod fishing. You choose the location, the bait, and the type of rod based on the fish you want to catch. With rod fishing, at least you have evidence of whether there were any nibbles or whether you caught something. The "nibbles" are the fish requesting more information or clicking through on e-mails or banner ads. Out of many nibbles, you may catch a few fish - the "conversion rate" - in advertising speak.
For age-old forms of direct response, such as direct mail and e-mail marketing, there are metrics that span the spectrum from reach to response to conversion - number of e-mails sent, open rates or click-through rates, and number of resulting purchases, respectively. However, too often people look at the number of e-mails sent or the open-rate and claim success. But ROI should be based on purchases that result from the marketing program, not on reach or even just response.
Pull Marketing: The Deadliest Catch
Completing the fishing analogy, pull marketing would be like king crabbing in the North Sea. The crabs come to you. And you measure success by the number of crabs that actually end up in your trapping pod. Correspondingly, when users pull for information (i.e., search), that's the best time to set your "trap" - search ads based on the word the user is searching on. You know what they're looking for and when they're looking, regardless of their demographic attributes (remember the example of the grandma who was looking for specialty Harley parts?). You measure success by the actions they take and you have a direct line-of-sight through to purchases.
Pull marketing doesn't measure reach (how many people may have seen the ad); in fact, it ignores it entirely because the ads are only displayed when the user initiates the action. Furthermore, advertisers can pay on a cost-per-click basis instead of cost-per-thousand impressions (i.e., reach). Doing a back-of-the-envelope calculation, assuming a generous 1 percent click-through rate, that means the other 99 percent of would-be-wasted ad dollars is no longer wasted, compared to other forms of advertising where you pay for reach.
So the moral of this fish story is that not all advertising metrics are created equal; nor can they all be compared. Some measure reach - how wide a net you cast, and not whether there are any fish in the vicinity or whether you caught any. Others measure nibbles (response) and success (the number of crabs caught). Advertisers should focus more on the latter. And if they were forced to continue to use channels with "dead metrics," the least they could do is integrate those with direct response tactics (click through to website so response can be measured) and pull marketing tactics (search engine optimization and search ads so nibbles and conversions can be measured). And definitely don't pay for reach when you can be paying a fraction of those dollars for success instead - i.e., don't pay for impressions (CPMs) when you can be paying for actual clicks (CPCs) or actions/purchases (CPAs). The fish will thank you.
Dr. Augustine Fou is the senior digital strategy advisor to CMOs, marketing executives, and global brands. Dr. Fou has over 15 years of Internet strategy consulting experience and is an expert in social media marketing strategy, data/analytics, and consumer insights, with specific knowledge in the consumer packaged goods, financial services/credit cards, food/beverage, retail/apparel, and pharmaceutical/healthcare sectors.
He is a frequent panelist, moderator, and keynote speaker at industry conferences. Dr. Fou is also an Adjunct Professor at NYU in the School for Continuing and Professional Studies and at Rutgers University at the Center for Management Development, where he teaches executive courses on digital strategy and integrated marketing.
Dr. Fou completed his PhD at MIT at the age of 23. He started his career with McKinsey & Company and previously served as SVP, digital strategy lead, McCann/MRM Worldwide and group chief digital officer of Omnicom's Healthcare Consultancy Group (HCG). He writes a blog "Rants, Raves about Digital Marketing" and can be found on Twitter at @acfou.
June 20, 2013
1:00pm ET / 10:00am PT