In my work for clients over nearly two decades, I’ve been asked countless times, “What is the optimal allocation of budget to digital?” And I’ve responded politely with “It depends on so many factors” so many times I sound like an ad for adult diapers. Now it’s time to “come out” as it were and declare that’s not even the right question to ask. But for those who did ask the question, let me pose a solution at the end of this column.
First let’s examine the simple root of the dilemma – the “Grand Digital Canyon,” which I wrote about in 2010; traditional advertising on one side and digital marketing on the other. Basically by considering traditional advertising as separate from digital, users must then ask the question how much to allocate to which. But what if digital and traditional were not thought of differently but instead were all equally valid forms of advertising and marketing. In other words, traditional media is great at some things – broadcast, branding – and digital marketing is great at others – direct response and performance.
Traditional Media Is One-Way; Performance Is Estimated at Best
Traditional forms of media such as TV, radio, and print are all one-way in nature and “advertiser outward.” In other words, a message is carefully crafted by the advertiser and blasted out at the targeted audience via these forms of broadcast media – the same message out to a large number of people. The metrics also deal with the size of the audience to whom the ads were intended to be shown. This kind of “reach and frequency” is measured in gross rating points (GRPs). In most cases, however, the advertisers don’t actually know if the users even saw the ads. The measurement companies could only estimate this using panels – i.e., small samples – extrapolated to the mass population. In any case, cause and effect also had to be estimated and directionally more GRPs usually meant more sales.
Digital Is Inherently Two-Way; Performance Is Directly Measurable
Digital, however, is inherently two-way. Ads are put out by advertisers and users view them (impressions), click on them (click-through rates), and then take steps toward the purchase. As more and more of these steps happen in digital channels, a greater portion of the users’ purchase funnel or “consumer journey” can be detected, and potentially directly measured. In digital channels, the type of ad spend has already shifted from 100 percent impression based (display ads) in the mid-90s, dominated by companies like Yahoo to now 66 percent performance based (search ads), dominated by companies like Google. Digital is inherently performance oriented and the market has already “spoken.”
A Continuum From Branding to Performance
So instead of thinking of the two sides of the canyon, perhaps we can think of a continuum with branding on the left side and performance on the right side – see “The Marketing Continuum” and “The Future of Advertising.”
On the “branding” side of the continuum, advertisers of “soup and soda” mainly need to prop up awareness, especially just before the user heads to the store. So indeed broadcasting one message out to a lot of people and increasing reach and frequency may be all it takes to increase (or maintain) sales.
On the “performance” side of the continuum, marketers of “cars and computers” mainly need to capture users who are doing more and more research online before they buy bigger ticket or more complex products. Even if they got inspired by an ad they saw in traditional channels, they typically come online to do further research.
So, traditional advertising is better suited to the left side of the continuum – the soup and soda end. Traditional advertising is great for branding. Digital marketing, however, is better suited to the right side of the continuum – the cars and computers end. Digital marketing, especially search marketing, is great for attracting users to the right content that they need to inform their own purchase decisions.
Conclusion – Find the New Equilibrium for Your Industry and Product
So, depending on what industry or product you are marketing, your company will be somewhere along the continuum from branding to performance. The lower ticket, lower consideration items like soda will probably skew more toward traditional advertising, which is great for branding. That is why it was not surprising for Coke to announce that social media buzz had no detectable impact on sales. If your industry or product were bigger ticket and higher consideration, then you would be closer to the performance end of the continuum, and therefore could focus more on the use of digital marketing.
In this way, we no longer separate traditional from digital, but rather determine a new equilibrium point on this continuum, which perfectly balances the use of traditional and digital tactics based on the industry and type of product being advertised.
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