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The Grand Digital Canyon - Have You Crossed It Yet?

  |  November 11, 2010   |  Comments

Allocating a small percentage of your ad budget to "digital" tactics is not the same as crossing the digital chasm. Here's why you must make that leap.

Crossing the chasm? The great digital divide? Or the grand digital canyon, as it were? Many people think they have crossed it; but in actuality most have not. Just like watching a beautiful PBS special on the Grand Canyon is not the same as actually being there, allocating small percentages of advertising budgets to "digital" tactics is not the same as crossing the digital chasm. Let me explain what it is and why it is important to cross it now.

This week, I was asked the age-old question about "media spend allocation" - if you had a finite marketing budget, how would you allocate it across channels and tactics to maximize return? The answer used to be somewhat elusive because various channels were good at certain things, audiences were fragmented across more than one channel, and the metrics of the different channels were not apples to apples - e.g., Nielsen's estimated TV audiences could not be compared with Arbitron's estimated radio audiences, magazines' circulation numbers, or outdoor billboards' estimated views.

Furthermore, targeting specific customers meant trying to find the TV shows they were likely to watch, the magazines they were likely to subscribe to, etc. While these methods of finding "buckets" of customers to whom ads could be served used to be sufficient, they are no longer good enough, especially given the shift of power to consumers, the wealth of information online, and the shear amount of unwanted advertising noise that makes consumers tune everything out until such time they need something.

Also, consider that estimating the size of the TV audience watching a particular show doesn't tell you whether any of that audience actually watched your particular TV ad; the circulation of a magazine does not tell you whether any readers turned to a particular page and looked at your ad, let alone remember it and take action; and finally, estimating the volume of traffic down a major highway doesn't tell you whether anyone looked up at or remembered your ad on a billboard. All of these "traditional" media channels provided estimates of audience size as a metric, but told you nothing about whether target customers took action and what action they took. Let's put these all of these traditional media channels on the "left side" of the canyon.

What goes on the "right side" of the canyon? Digital tactics, of course. These could include paid search advertising, search engine optimization, banner/display ads, social media marketing, mobile marketing, etc. A diverse set of tactics and disciplines indeed. But is that the common thread that relates them to each other and that sets them apart from traditional advertising channels and tactics? The metrics have to do with whether target customers took action and the action that they took. For example, clicks on banner ads, the search term that triggered the paid search ads and the clicks on the paid ads, etc.

Even more examples come from recent successes like Groupon where tens of thousands of users paid for half-off dining Groupons - in essence, committing dollars before they even get to the restaurant. Once they've committed dollars, they are likely to go to the restaurant for a meal. Compare this "digital" tactic to the local advertising that restaurants used to do in yellow pages or newspapers. In those "left side" tactics, the restaurant only knows an estimate of the circulation of the newspaper, and the ads in the yellow pages are likely to be out of date by the time they print and circulate the books.

And let's consider one final thing - whether you, the advertiser, are paying for reach and frequency or paying for success. In the case of traditional channels, one of the most expensive "buckets" of marketing cost is the media cost - the cost of airing or circulating your ad. If you take banner ads as a cross-over example, advertisers can pay on a CPM (cost per thousand) basis or a CPC (cost per click) basis. In the case of CPM, advertisers pay for the trillions of times a banner ad is displayed (impressions) while in the case of CPC, advertisers only pay when there is a click. If you assume a 1 percent click-through rate, that means the other 99 percent of the impressions were wasted. So if you had a choice to pay by CPM or CPC, which would you choose?

And getting back to the original question, have you crossed the "digital chasm?" If you had finite marketing dollars, would you spend it on "left side" channels which only tell you estimates of audience size that may have been exposed to your ad or on "right side" digital tactics that are more measurable and effective and provide metrics that relate to customers actually taking actions?

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ABOUT THE AUTHOR

Augustine Fou

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.

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