ROI: RU OK?

For decades communication agencies have been doing their best to avoid the most critical of questions: What is the return on their marketing investment?

Why the avoidance? Because it has been almost impossible to measure the results of long-term branding campaigns that are often run over several years and across multiple channels, handled by multiple agencies, and managed by multiple departments. With no means of objective measurement, most marketers fall back in desperation on well-tested media channels, such as TV, radio, and print. Communication strategies employing these media have worked for years, and it’s unlikely anyone would be fired for choosing them.

But as most corporations across the globe decrease their marketing budgets and go through the tough process of deciding what to keep and what to cut, that fundamental question of return on investment (ROI) must be asked. Now that digital media has become more focused not only on monitoring consumers’ online behavior but also on accurately predicting behavior, we’re closer than we’ve ever been to being able to answer the ROI questions we dared not ask just five years ago.

So, how do you document your ROI? And how do you determine which medium — which communication strategy — is able to move products over the counter most effectively? In this and the next two articles, I’ll discuss the ways you can assess your return on investment, and I’ll introduce tools for answering some of your trickiest ROI questions.

Let’s start with two classic assessment points: Does your online advertising generate sales? And can you measure the success of your online brand building?

Does online advertising generate sales?

Unless you’re a pure dot-com e-commerce player, this question has been a difficult one. Or has it? Every activity you run should be accompanied by a response form that enables you to track consumer behavior, right from the point at which the consumer’s attention was harnessed. But do me a favor: Don’t stop halfway. BrightStreet.com offers consumers online coupons that can be redeemed in the store. The result of the coupon strategy is BrightStreet.com’s amazing ability to track consumer conversion rates: Consumer activity can be observed from the time a banner ad is clicked to the point of actual purchase of the promoted product in the store.

The technique is simple. Ensure you’re with your consumer the whole way. Every link — from the ad to the promotion site, from the promotion site to the real site, from the real site to the store, from the store to the cash register — has the potential to reduce the conversion rate. So, optimizing each of these consumer touch points is the obvious solution.

But how can you possibly achieve this without a comprehensive picture of the consumer’s behavior patterns? If you can optimize your consumer touch points and track conversion rates, you’re so much closer to forming a clear picture of the level of actual sales generated by your online advertising. And, conversely, you can analyze why your online advertising is not achieving desirable conversion rates.

Can you measure the success of your online brand building?

First, let’s define online brand building. Theoretically, it’s a systematic means of establishing and strengthening a relationship between your brand and your consumer. The aim is that the relationship becomes so successful that the price factor is eliminated as the chief reason for your consumer purchasing the product.

Online brand building encompasses a complex of aims, duties, and choices. But there are two vital issues: conversion and retention. Your brand building must be able to convert new customers to your brand, and it must retain your existing customers, cultivating their brand loyalty. Is it possible to measure these vital online brand-building elements simply by adopting a new way of using your site? Fundamental to this is that you know where your consumers have come from before arriving at your site and where they go after visiting your site. Hitwise was one of the first companies to offer a measurement service that enables you to form a picture of your key competitors and your consumers’ loyalty to your brand. Imagine that you’re a car manufacturer and most of your visitors come from insurance sites. Would this affect your Web strategy? Or imagine that you’re a financial institution and most of your visitors head off to an insurance company’s site after leaving yours. Would this behavior signal any potential to you? You should know who your competitors are, and you need to learn of new business opportunities before they erode.

Alternative techniques enabling marketers to effectively monitor and predict their sites’ ROI have newly appeared on the Web scene, so stay tuned. Next week, I’ll discuss two more ways you can monitor your brand’s relationship with your consumers. That’s two more ways of getting a reliable indication of your ROI.

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