One of our retail clients presents two slides at every board meeting: the first shows all of their marketing initiatives that aren't measurable with ROI and the second shows all of the programs that are. He noted that his performance review is tied directly to the number of programs that he can move from the first slide to the second. Clearly, in an increasingly efficient and accountable economy, the old Wanamaker adage that ‘half the money I spend on advertising is wasted; the trouble is I don't know which half’ is no longer acceptable.
So, how did we get here? And, how can we move toward deterministic measurement to ensure we are investing in channels, publishers, creatives, and placements that drive the highest return?
Art vs. Science
Twenty-five years ago, targeting and measurement were more art than science – with a considerable margin of error. We were doing the best we could with the data and analytics available, but it was challenging to find the right metrics and tools to demonstrate the impact of our marketing spend. Over time, more data sources flooded the market, presenting an overwhelming amount of options. Now we had a new challenge, sifting through the data sets to determine what had relevance.
Technologists stepped in with sophisticated, and fast, systems to help deliver data in more usable forms, and a shift in marketing began to take hold. Early loyalty and CRM systems launched. Many households got check cashing cards. Probabilistic mix models became the source of truth. Once a primarily creative process, targeting, and measurement now had a layer of science. Billions of operational dollars began flowing into data centers with the promise of precise targeting and measurement at scale. CFOs were no longer satisfied with measuring what might be true. They wanted certainty in the quantitative impact of their company’s marketing spend.
But, as marketers, we were challenged to provide this level of measurement. We have gained more insight for sure but getting to absolute measurement is still a challenge. New marketing technologies offer a more sophisticated view of consumer data with more robust analytics, but very few connect the data points in a way that provides us with accurate ROI. For example, geolocation helps us better understand brick-and-mortar sales by linking someone’s location with an assumed purchase. While driving foot traffic is an important part of marketing goals, it is still an ROI ‘guess’ at best. Online, clicks have long served as a proxy for consumer intent to buy, but causality remains a challenge, particularly offline. Both of these technologies got us closer to the end goal, but neither were truly deterministic.
The new currency is currency
Deterministic consumer spend data is becoming more readily available, allowing us to more precisely target consumers and, more importantly, measure campaign effectiveness. As an industry, we are at the early stages of integrating this insight into our digital marketing capabilities. The promise of CRM systems combined with bank transaction data provides us a full wallet picture of spend. This view provides the unique and exciting ability to target consumers and measure campaign effectiveness based on actual spend, not surveys, models, panels or proxies.
The path to deterministic targeting and measurement lies in integrating actual purchase data, with the ability to measure true incrementality. In many of the largest channels, we still measure campaign effectiveness with archaic metrics like effective CPMs, clicks, and ratings points, when we have the ability to measure effectiveness in what matters most to CFO’s…actual dollars.
This blog was adapted from a contributed piece I authored for MarTech Advisor. Visit http://bit.ly/1RLe5Zs to read the full article.