Dabbling into online advertising may have you down if you’re comparing it to the ol’ days of ’95 when it was easy to record how many selected your ad banner.
Don’t get me wrong, click-through measurement is a good way to monitor the effectiveness of your ad campaigns. But what’s the best method to measure online ad effectiveness? Frankly, it depends on your marketing objectives. According to Geoff Ramsey of eMarketer, “you have to took at your own world and determine if you’re looking for brand awareness, response, sales transactions, etc. We are still in the early days, so you can experiment. The nice thing about the web is that you can test ad creative, formats and models less expensively than any other medium.”
Let’s explore one of the better measures for web marketers looking for response and transactions. This requires some soul searching, commitment and investment on your part — whether you sell advertising or are looking to buy advertising. If you’re looking to buy, you want to identify web sites and ad networks that provide this capability, but you have to be able to pick up where these online ad providers leave off. Let’s take a look at measuring cost-per-action.
Cost Per Action
Before getting into the concept and methods of measuring cost-per-action, let’s look at the ways to get more people to click on your online ads. If no one clicks, there’s no response to measure. There are many ways to improve responses such as ad placement, ad location, ad design/creative, etc. You can use ad targeting, (which you have read about in my previous articles) and can also check out advice from other experienced folks at ClickZ.
The web-marketing folks at The New York Times have recently released a white paper that highlights case studies using one-to-one advertising and a cost-per-response measurement. The basic premise of the cost-per-action measurement model is not necessarily achieving maximum click-through, but more efficiently converts the browser to buyer.
The logic goes something like this: The more targeted the message, the more qualified the respondent, the greater the likelihood of converting a browser/respondent to a buyer or prospect. One of the case studies in the white paper highlighted two flights of an employment advertising campaign. In the first flight the advertiser tested creative messages and ad location (targeted by content or run-of-site). They used the results of first flight to refine the message and targeting based on the response. In the second flight, the advertiser ran the same number of impressions, at the same cost, but presented the optimal creative to the best target. The result from the second campaign was a shorter campaign length (from 45 days to 30 days), an increased user response (from 2,070 to 6,175), and a lower cost-per- response (from $12.56 to $4.21).
“Of course, cost-per-response varies widely,” states Mr. Ramsey. “If you sell a highly considered item like a car then an acceptable cost-per-response could be more than $100. If you sell a low-ticket item, then your cost-per-response may need to be $1.00 or less. There is no average measure so you will need to determine the cost based on your business, products and other media you use. Only time and testing will tell what will work best for you in this new medium.”
What It Takes
Again, the cost-per-action model is one single measure of advertising effectiveness. You will need to determine what “action” to measure — ad response, lead/inquiry, sale (web or in-store), etc. From there, you could move to measuring customer acquisition cost, which requires the customer to actually buy something. In order to be able to track users this way, you’ll need to have a few things in place first:
- A Process Mentality — With response-oriented ad campaigns, you need to think of your ad campaigns with a process mentality because tracking doesn’t stop at the click. In some cases, you will need to track the customer from click, to lead, to sale, to customer service — both online and offline. Can you connect these dots today? If not, this will require you to know your business processes, information systems and customers.
- One-To-One System — You will need databases and decision systems that can serve and track targeted ad messages. Today, many systems can track the clicks from the ad to the web site, including a web purchase. There are also examples of companies tracking beyond, if email correspondence, lead management, 800 number calls, or retail purchases are involved. Think “integrated” and “portable” when it comes to tracking your respondents and customers across media and points-of-purchase. Integration requires ad, web, email, database and transaction systems to be tied together. Portability requires user profiles to be portable across the same systems and communication points. Advertising providers and web marketers need to find ways of bridging any gaps.
- Privacy — I am sure you aren’t surprised by this item. The only effective way to target ads and information is to obtain data from the user. And going any further to track the customer beyond the ad requires you to tag and access each user profile. According to Chris Neimeth, group vice president and director of sales and marketing at The New York Times Electronic Media Company, “we treat information at point of registration delicately. We follow two basic principles regarding gathering and using user data. First, we practice full disclosure so the user knows what their data will be used for. Second, we practice what we call ‘optability’. This allows our users to change profiles and opt out of the process if they don’t want to participate.”
Next Week: What it takes to be customer centric and why you should care.