The Perennial Question (Sort Of Answered): How to Measure Advertising ROI!

The Perennial Question (Sort Of Answered): How to Measure Advertising ROI!
SHARE
THIS



In his latest post, B&T’s resident industry contrarian, Robert Strohfeldt, tackles the oft cited “which fifty?” view of marketing. How exactly do you quantify your ad spends…

Ever since John Wannamaker made his famous quote: “Half the money I spend on advertising is wasted; the trouble is I don’t know which half”, people in business have been trying to come up with an accurate measure of return on advertising.

We only have ourselves to blame. When someone within an organisation, often the finance department (and the CEO’s nearly as frequently), go on a cost cutting exercise, the marketing department will pipe up and say advertising is not a cost, but an investment.

“OK, then show us the return on this supposed investment”. The problem is that unlike virtually all other investments, the return is not easily quantifiable.

Advertising is not at all like other “traditional” investments. Shares can be calculated by dividends paid and share price growth. (A very simplistic description.) The financial markets have any number of financial products, many of which are no more than gambling with a sophisticated name e.g. foreign exchange sounds far more impressive than “the pokies”. But like the pokies, win, lose or draw the house gets its cut.

Property has various widely accepted formulas for commercial or residential. Private equity firms live to “do deals”, by the end of which an accurate percentage return can be calculated.

When talking about investments generally, the ROI is measured in per cent value of the return on the investment.

Advertising does not exist in a vacuum; it is an element of marketing. I recently read a report on Marketing Metrics. It was full of buzz words and phrases, stating the bleeding obvious:

“We face an incredible opportunity for marketing to reinvent itself as a core part of the company’s growth engine.”

“Marketers who invest in measuring and managing performance create more value.”

“Data is for delivering insights.”

“Align actions and outcomes that matter the most.”

Blah, blah, blah.

Over half the report rabbited on about the need for marketing (and advertising) to show, by measuring, what it did for the revenue of a business.

No shit Sherlock. Next someone will conclude that the role of sales is to, well, sell stuff. A bit harsh, but surely marketing and advertising have been around long enough and companies have spent shit loads of money that maybe, just maybe, a director or two (those who have their houses on the line) may have asked “So how much of a return do we get for that million bucks we spent on advertising?”

Wannamaker was born in 1838 and went to that big advertising lunch in the sky in 1922. So, for well over a hundred years, people have been trying to calculate “the return on their advertising and/or marketing dollar”.

It may not always be a monetary return that is being sought. A quote from a story in Marketing Week: “If you ask someone ‘tell me a crisp brand’ they are going to say Walkers. We are number one and top of mind far ahead of competitors,” Kahane claims. “We have created great ads that engage the nation [before] but [the challenge is] they have not really made people talk about the brand.”

So, the objective of the advertising in this instance is to get people talking about their crisps. (True. You can’t make this shit up). Not quite sure how you measure that, but it was the stated goal. This marketer went on to state they were not in the business of crisps, no, no, no. They were in the business of enjoyment. (I reckon they may have some stiff competition from the world’s oldest profession.)  No wonder doctors, lawyers and accountants think marketing and advertising people are a bit loopy.

There are marketing effectiveness awards that aim to determine how successful (or not) a marketing campaign was. These awards tend to look at the result of individual campaign.  And a marketing campaign is comprised of several components, of which advertising in only one.  So, the award is for a “sum of the parts”.

It is hard to attribute the success of a marketing campaign solely to the advertising, as distribution and pricing will more than likely have played a role. Plus the winners of significant Effectiveness awards have nearly always used an integrated approach to their advertising.

Recently Tourism Australia won a gold in the US Effie Awards. Without going into detail, the campaign was exactly that, a campaign with three phases, each of which utilised several different communications tools. Success was measured by both research, which could be compared to previous benchmark data and a measurable increase in US tourists heading to Australia.

But this is different to trying to measure how an individual ad, or even advertising campaign, performed.  Not to say it is shooting in the dark, there are a number of methods of determining an ad or ad campaign’s effect. But there is also long-term brand building that advertising contributes to, which would not show up in any immediate measure.

Work from the renowned duo Binet and Field say the optimal split between long term and short activity is 60:40. Advertising effectiveness is always measured over a set period, not a continuum.

There is general agreement today that both distinctiveness and difference are both factors in a brand’s success. The better a brand is known, the better it performs, and brand assets play a major role in this – logos, colours, straplines, symbols and advertising style or look. The Kotler view of the world was a brand’s success was due to difference, where today it is recognised salience is probably even more of a factor in success. (The USP has been consigned to history.)

But this thinking is in fact not new. Back in the 1950’s studies concluded the greatest driver of brand purchase was brand awareness. A good friend and colleague, Professor Stephen Holden, did his Doctoral thesis in 1922 on salience and it well worth reading. 

But of all the techniques being used, attribution is by far the least understood and most widely abused. In the words of one researcher: “Regardless of the touchpoint type, attribution involves the measurement of multiple marketing tactics in an effort to optimize those that are delivering the best results.”

That is a sensible endeavour. But the problem is trying to identify every variable that can influence a sale. This not only varies from one individual to another plus it can vary day to day with the same individual.

Attribution is not new, but it has become fashionable. TW Anderson published the first widely used textbook An Introduction to Multi-Variate Statistical Analysis in 1957, though the maths it is based on was developed in the early 1800s.  In simplistic terms, attribution (some form of multi-variate analysis, or more factor analysis may be more appropriate) is used in science, medicine and more recently in business, to try quantifying the influence each variable has on a particular outcome.

It is difficult to give “folksy analogies” but imagine looking at how rainfall influences a plant’s growth. Too little or too much will kill it. But rainfall is not the only variable that impacts on the plant’s growth. Drainage, sunlight, temperature, different nutrients – there are a huge number of variables that influence the ultimate outcome. The goal is to quantify what percentage each variable contributes to an optimal outcome and identify which variables contribute the most.

But plant growth is very simple compared to human behaviour. (A generalisation. We have all met people who make plants seem intelligent and well- adjusted). Not only are there so many more variable at play, the variables and the impact of each is different for everyone.

So, how do we quantify ROI for advertising? If we are honest, the answer is “there is no one technique that can be applied to all cases”.

It is a case by case situation. I am sure most people have heard the colloquialism “it pays to advertise”. Yep, just about everyone agrees with this, but exactly how much could be described as “anyone’s guess”.

Please login with linkedin to comment

Robert Strohfeldt

Latest News

Crater Teams Up With Director Luna Laure For ‘Harry’s Story’, Canteen’s Newest Campaign
  • Campaigns

Crater Teams Up With Director Luna Laure For ‘Harry’s Story’, Canteen’s Newest Campaign

Canteen’s latest campaign features the combined talents of Director Luna Laure and creative agency Crater. The campaign strives to raise awareness for young people affected by cancer. The awareness campaign centres around Harry Barentson, who at 12 years of age found out his pregnant mum had cancer. While his mother fortunately survived, he lost his […]

AFL Legend Kevin Sheedy Narrates ‘A Love Letter To Victoria’ Via Enthral Partners
  • Campaigns

AFL Legend Kevin Sheedy Narrates ‘A Love Letter To Victoria’ Via Enthral Partners

In partnership with storytelling agency Enthral, AFL star Kevin Sheedy has voiced a video ‘Love Letter to Victoria’ using visuals to showcase the state’s natural beauty and culture. Victoria has been hit with the worst of the coronavirus pandemic compared with any other Aussie state experiencing four lockdowns. Sheedy has partnered with Ethral to share […]

Telstra’s Belong Appoints Howatson + White For Strategy & Creative, Retains OMD For Media
  • Advertising

Telstra’s Belong Appoints Howatson + White For Strategy & Creative, Retains OMD For Media

Telstra’s lower-cost telco, Belong, has awarded its strategy and creative account to Howatson + White, and has reappointed OMD to its media buying account, after a competitive pitch process. Howatson + White will handle strategy, planning, creative and CRM, while former agency Clemenger will continue to have a relationship with Belong, managing PR and retail activation. […]

Coke Releases New Campaign, ‘Turn Up Your Break’, Via Ogilvy
  • Advertising
  • Campaigns

Coke Releases New Campaign, ‘Turn Up Your Break’, Via Ogilvy

Coca-Cola Australia has rolled out its new campaign ‘Turn Up Your Break’. The campaign will be led by a TVC that encourages people to truly pause with a Coke on their break so they can walk away feeling refreshed and uplifted. The TVC features two busy chefs stepping outside for a break, the bustling kitchen […]

Nova 91.9’s Ben And Liam Locked Up In Rundle Mall To Raise Awareness For Mental Health
  • Marketing
  • Media

Nova 91.9’s Ben And Liam Locked Up In Rundle Mall To Raise Awareness For Mental Health

Nova 919’s Ben & Liam breakfast show announced that they’ll be throwing their support behind and raising awareness for a cause very close to their hearts, mental health. On Monday 21 June Ben Harvey and Liam Stapleton will be locked in a purpose-built glass structure, in the middle of Rundle Mall, for an entire week […]

iHeartPodcast Network Australia And The New York Times Agree Podcast Ad Sales Deal
  • Advertising
  • Media

iHeartPodcast Network Australia And The New York Times Agree Podcast Ad Sales Deal

ARN and The New York Times have reached an agreement for ARN to become the advertising sales representative for The New York Times’s podcast portfolio in Australia. The deal will enable Australian brands to connect with Australian listeners to The New York Times’s most popular podcasts, such as The Daily, Serial and This American Life, […]

Verizon Media Academy Ends For 2021 With Youth Charity Pitch-Off
  • Advertising
  • Media

Verizon Media Academy Ends For 2021 With Youth Charity Pitch-Off

Verizon Media’s talent program has come to an end for the third year, closing with a hybrid pitch-off event for Musicians Making A Difference (MMAD). The Verizon Media Academy class of 2021, made up of 44 emerging leaders from across Australia and New Zealand media, advertising and marketing industry, were given just one hour to […]