(By Bob McCurdy) Last week’s article focused on a marketer’s over-reliance on ROI and overzealous bottom-of-the-funnel focus to guide their ad investment. What’s below expands upon the dangers of jumping the gun and judging payback (ROI) too quickly.
Adweek recently published a piece, “LinkedIn Finds That Digital Marketers Are Too Hasty to Try to Determine ROI,” which highlighted the results of a study focused on return-on-investment. The word “digital” could have easily been omitted from the title as we often run into local radio advertisers who attempt the same thing. Just as Orson Wells famously said here that, “Some things can’t be rushed”, this study suggests taking a deep breath before attempting to determine campaign payback. It appears few are heeding this advice.
Gauging ROI “before its time” can result in poorly optimized campaigns and missed revenue opportunities. Response to advertising is typically not instantaneous unless the offer is unusually enticing. The reason for this is simple. It takes time for the messaging to kick in (frequency) as well as for the purchasing cycle to come full circle, as advertising rarely puts consumers in the market for a product, “life” typically does. The chances are we are not going to need detergent anytime soon if we have just purchased a one hundred ounce jug of Tide recently. When it is empty, that is a different story.
Some of the study’s findings follow:
– Return on investment is key, but marketers are short-changing their efforts by trying to measure it much too quickly.
– One of the key findings of our survey is that digital marketers are trying to prove ROI in a shorter amount of time than the length of their sales cycle. We know that the typical B2B (business-to-business) sales cycle can last anywhere from one month to two years, but the average B2B sales cycle usually takes place over six months or more. And yet our research shows that digital marketers attempt to measure the ROI of their programs almost immediately.
– When budget allocation decisions are made on short-term performance, marketers might put more money into a campaign that demonstrated initial lift but lacks longevity of impact. This could also mean that channels or campaigns that could be better served by additional funding, but need more time, are short-changed.
The study also suggested that digital marketers, by attempting to gauge ROI too quickly, are actually measuring the initial short-term impact of their campaigns and not their campaigns’ ROI, due to the speed of their analysis:
– 77% of digital marketers measuring ROI within the first month of a campaign.
– 52% who measured ROI in less than one month did so on campaigns with sales cycles of three months or longer.
– Just 4% of respondents measured ROI over periods of six months or longer.
It is critical that advertisers understand that ad response is not akin to turning on the lights. Results are not instantaneous and, importantly, do not cease immediately upon a campaign’s end. While a “hard stop” might exist on conference calls, it does not exist when it comes to advertising’s impact. The following are two of many such studies that have corroborated positive sales impact beyond a campaign’s end date:
– Nielsen Catalina Solutions and CBS partnered on a TV study that concluded that “long term” ROAS, defined as more than one month, increases ROAS between 1.8x and 4.5x.
– TRA and Dunnhumby discovered something similar, concluding that sales lift in weeks 5-20 more than doubles the sales lift in weeks 1-4, and that even after 20 weeks sales from exposed households continued to surpass sales from unexposed households.
Establishing expectations with clients prior to the onset of a campaign is key and one of the expectations should be to anticipate a certain amount of ramp-up time for the campaign to kick in, establish some frequency and for the customer purchase cycle to come full circle. The overall effectiveness of any campaign should never be judged immediately upon completion, but at least two, three, four weeks post campaign. This will serve to provide a clearer picture of overall campaign return and prevent knee-jerk allocation decisions, which can prove harmful to an advertiser’s health.
If Orson Wells were an ad man he would have surely said, “There will be no ROI before its time.”
The entire article can be read here.
Our clients typically spend more on advertising than they invest each year in their retirement plans.
The irony is that they’ve been conditioned by our advertising sellers to expect paradoxically unquantifiable, yet near immediate, sales results; yet, are willing to wait for quantified, long-term returns and endure ups and downs in their investment portfolio.
Over a period of years, these same clients won’t hesitate to fire their financial planner if they don’t see a positive return in the lower right hand corner of their monthly investment statement. At the same time, many will fire their media seller if they don’t see a quantified return on ad spend in a matter of weeks.
How do we turn this to our advantage? Year after year, thousands of advertisers tell Gordon Borrell‘s spring survey that they want two things from media, that they’re not getting on the whole:
1. Over-arching, client-objective-focused, marketing strategies – that should not be focused on the objectives of the medium doing the selling.
2. Quantifiable sales results, directly attributable to the medium doing the selling.
The wonderful thing is that radio has the innate advantages – plus the capabilities – to deliver on both sets of articulated advertiser needs – and deliver on such, 52 weeks a year. The systems, strategies, advertising and sales tools have existed for decades.
Having utilized these both inside (as an employee and owner) and outside our industry, I am perplexed by radio’s collective refusal to be held accountable for quantifiable, attributable, sales results.
Putting to use these tools of transparency, to generate more sales and profit for both the advertiser and the radio station than the status quo, enables radio to jump advertiser and station sales in a matter of weeks; ratcheting radio’s revenue trajectory upward; beyond its inflation-adjusted, flatlining track record.
If one person can generate millions in doing so, our industry can generate billions.
Even if the messaging was secure – a dubious stretch at all times – how many of us have heard: “I tried radio for a couple of weeks and nothing happened. Radio doesn’t work!”
Yet, AE’s continue to book those 2-week campaigns – in the attempt to make budget.
AE’s pressing hard for longer campaigns are far more likely to get their lunch eaten by the advertisers and their butts verily smitten back at the station.
AE’s who continue with this practice are force-feeding advertisers tasteless rube fodder. A few do so knowingly – sometimes producing a little throat vomit.
Ninety-three percent penetration? So what?
Bob nails it again.