Posts Tagged ‘ROI’

February 23rd, 2011

TV product placement goes live in the UK from February 28th

If you are tiring of the hype about how your brand can’t possibly survive the next week without a social media strategy, you may be interested in another quieter revolution that is about to go live on our TV screens. On the 28th February product placement goes live on UK TV.  Whilst this doesn’t directly involve a computer (unless someone submits one), this is a significant new media opportunity for UK advertisers.

Earlier this week an edition of Coronation Street (the UK’s leading and longest running soap) featured a kitchen shot which included a packet of, I think, ‘Honey Nut Cheerios’. Take note, that’s not ‘Cheerios’ or ‘Honey Nut Loops’ but ‘Honey Nut Cheerios’. If like me you find these sub-text jokes by ITV’s production teams rather amusing you’ll be sad to know that their days are almost certainly numbered. But all is not lost; the commercial opportunites around product placement are set to mushroom and that’s good news for advertisers.

From February 28th we can expect to see more popular high street brands making star appearances on the breakfast tables of some of the UK’s leading programmes.  The opportunities are of course almost endless. Many TV programmes feature kitchens, kitchen tables,  cars, clothes, shoes, TVs, mobile phones, T-shirt logos, food products and drinks to name but a few. As the year progresses we are likely to see more branded products appearing more overtly in programme content. This raises two questions for advertisers and marketers.

First, how do brands make it work? I see product placement as being a bit like sponsorship where the route to impact, acceptance and increased brand salience is through careful targeting of content, environments and associations. A brand that makes the right association with a point of view, a cause (even if only fictional) or a personality may well benefit. A brand that gets it wrong may suffer the indignity of product mis-placement.

The second question is how do we evaluate it? This one is tricky because the returns are unlikely to be short term or immediately obvious. Product placement is not as intrusive as advertising; the advertiser is not granted sole use of the screen for the ad slot they’ve purchased. Product placement sits on screen within another set of messages that are being received in different ways by viewers. This carries a potential risk of intrusion which needs to be measured and managed as carefully as any awareness or sales upside.

In the US where product placement has been around for some time, there are media tracking companies who use image recognition software to measure how long a product has appeared for. They then attach audience size and cost data to provide a value for the reach and length of exposure obtained for the brand.  It seems that in the main product placement evaluation is limited to calculating the media value of brand exposure and to measuring recall and awareness.

One interesting metric could be changes in online brand searches as a result of product placement views or mentions. I know from working with advertisers that just one mention of a product in a property makeover programme for example can drive a significant spike in online brand search activity and e-commerce sales. It may be that the granularity of search data may allow it to emerge as a useful currency for measuring the short and medium term effectieveness of product placement.

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October 19th, 2010

On a clear day: Measuring ROI in Social Media

Measuring ROI in social media is a big concern for marketers as they consider moving budget away from traditional media channels and into social media activity.  But before they can invest in social media, marketers need to get an idea of what it can contribute to their brand.  This has driven a debate about measurement in social media but unfortunately much of the discussion is focused on measuring social media for social media’s sake. What we should be asking is how do we measure the delivery of marketing objectives when we run activity across the social media platform. When we look at it this way we focus on measuring marketing outcomes versus marketing objectives and the answers become much clearer.

As a start point, everyone needs to recognise that social media is a media channel. It is not a marketing discipline. It is not a marketing objective. It is not a marketing strategy. So we might use the social media channel to raise brand awareness (objective) by targeting affluent new car buyers in social media (strategy), we might use social media to increase consideration (objective) by informing new car buyers about the unique benefits of the car we are selling (strategy) or we may use it to increase sales (objective) by communicating a last minute ‘walk-in’ trade-in deal (strategy). The metrics we use to measure social media should therefore relate directly to the objectives and strategies that we managing through the social media channel.

So, before we can measure social media we need to understand what we want social media to deliver from a marketing perspective. Only then can we select the right types of measurement and metrics to get the job done properly. Here are three examples of how we might measure social media activity against the delivery of three different marketing objectives:

  1. Objective: Raise Awareness: There are a number of good tools for measuring online brand awareness, ad awareness, product awareness and salience. Ad Index from Dynamic Logic allows you to play ‘spot the attitude difference’ between web users who have been exposed to your messaging and those who have not. You can ask exposed and non-exposed groups bespoke questions about your brand and campaign activity which allows you to contrast and compare the differences between the two groups. Brand sentiment can be measured using sentiment trackers like Sentiment Metrics; through without bespoke surveys these may include a range of external references to your brand, not just your own social media activity.
  2. Objective: New Customer Acquisition: If we want to use social media as a new customer acquisition tool then we should be using customer acquisition metrics. Microsoft’s Atlas can be used to track the online behaviour of your social media users across all touch points in the sales funnel. Bespoke tracking URLs in your social media pages can be used to identify visitors to your site originating in your social media pages. This type of tracking means you can ultimately relate customer value back to your social media activity.
  3. Objective: Increase Retention / Loyalty: Here we can combine online tracking, data collection and customer data analysis to understand the contribution of social media. We can collect prospect and customer data in social media pages or in pages that link directly to social media. Fusing data collection with online tracking means we can find the data source of known named customers and measure their progress and value in the sales funnel and through cross sell and up-sell. The results from this type of activity may not be instant; customer value from market source can take a year or more to establish, but once it’s in place you will be able to see how social media is building sales revenue for your business.

The message is that we can’t measure social media for social media’s sake. We should always be measuring how social media performs against a given marketing objective. If we are clear about this, the techniques and metrics for measuring and evaluating social media ROI become much easier to identify, select and implement.

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June 12th, 2009

Measuring web sales from offline advertising like TV, press and radio

If you are running press, radio, TV or DM activity to drive traffic to your web site and generate online sales, you may be wondering how to measure the relationship between offline media and online sales. This short piece will give you a simple guide to analysing whether your offline advertising is delivering web sales.

It’s worth stating at the outset that the job of relating offline media to online response is a complex area. Media channels like TV, press and radio don’t carry cookies so the tracking options available within the online sales funnel are simply not available when you start working with offline media.  Consequently,  we have to use other techniques that can give us an informed view about ROI from offline media in online environments.

The approach I am going to take you through is not 100% watertight, but it is a fraction of the cost of statistical modelling and will give you a reasonable idea of how to explore the efficiency of offline media in driving online sales.

Stage 1 - Visual observation of the data

  1. Obtain web log data running around 1 month prior and 1 month post your offline campaign activity
  2. These web logs should be daily level data showing both total unit sales and total sales value by day
  3. If possible obtain data for sales originated through both search engines and direct browser visits
  4. Enter into an excel spreadsheet
  5. Separate these two sources of data and undertake the following for each of the two sales data sets
  6. Add your daily offline media spend
  7. Chart the direct and search sales alongside the spend data
  8. Look at the data and see if there is any visual pattern in it. See of there are slight rises either during or lagged behind your offline campaign activity
  9. If there are any patterns which suggest an effect between your offline media and online sales proceed to the next stages.

Stage 2 -Sales analysis by day of week

  1. We need to ‘eliminate’ any day of week effect (for example, for many online companies Sunday and Monday are often their best sales days) so sort your data into the seven days of the week for the whole period
  2. You should now have seven mini data sets, one for each day of the week, each containing media spend (where applicable) and sales data.
  3. Calculate the average number of unit sales or sales revenue for each day of the week
  4. Now rank within each mini data set of days by daily unit sales or sales revenue
  5. Compare the sales for each day to the average of that day over the period
  6. If the advertising supported days are all above average, then your offline advertising is likely to be driving these online sales.

Stage 3  - Estimating the value of web sales driven by offline advertising

  1. For each of the days of the week, refer back to the average sales for each day
  2. Now for each of the days with web sales above the average, subtract those sales (or their sales value) from the average figure for the day of the week
  3. This is your incremental sales revenue
  4. Now compare your total incremental sales revenue to your offline advertising spend in the period
  5. You can now estimate sales and gross margin ROI
  6. For revenue ROI, compare the incremental sales value to the ad spend
  7. For gross margin ROI estimate your gross margin a percentage of sales and then compare the margin value to the advertising spend.

You will also need to factor in seasonality. Ideally, you would undertake the same exercise for the same period one year prior to the period you are analysing. If your sales in March are high, it may be the case that March is a good seasonal sales month. You need to account for this eventuality too.

If you’re an advertiser with large volumes of traffic and omnipresent advertising, then of course, things become more comlex. You will need to build a test marketing campaign structure with lots of media variation - i.e. different channels running at different times with different messages. This can then be seasonally adjusted and modelled using multiple regression to estimate the sales effect of each media channel being used.

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June 9th, 2009

Online advertising works beyond the click

It’s an ongoing debate: just what influence does digital communication create beyond clicks? Well the short answer is a lot. It contributes the following:  subsequent search visits (product and brand terms),  subsequent direct site visits (over the short and long term), visits to retail premises in the case of retailers, visits to attractions in the case of leisure destinations and shifts in brand and product reputation in the case of branding messages and content.

Recent research from iProspect / Forrester (May 2009) supports this view. It reveals that of those who viewed online ads on an ad funded web site,  only 31% actually clicked, but a further 48% either searched for the product in a search engine or subsequently visited the site via a direct browser visit. A further 9% reported that they investigated further through social media or message boards.

forrester-click-behaviour-june09

Readers who run online campaigns will observe that few online campaigns generate click through rates as high as 31%, in fact, most display campaigns generate click rates of about 1% of that, i.e  0.31% or less.  If we factor down the other responses by a similar level, then we get to 0.27% performing a direct search and 0.21% visiting the advertising site directly through their browser.  Whilst these numbers may appear low, it does indicate that responses are many and varied and exceed the response counted as clicks alone.

I’d argue that when it comes to branding effects, such as awareness, attribution and considerations scores,  the numbers may be higher than the figures above suggest.  The problem is that we have not fully understood how to quantify these additional branding effects. There are products able to isolate groups people who are exposed to online communications and, via online surveys, compare their advertising and brand awareness to non-exposed groups, and these can reveal interesting short term results. See some of those here.

But often the changes in awareness and consideration build slowly over time, particularly in products which have to be advertised almost constantly in order to reach comparatively small groups of active buyers. Mobile network O2 springs to mind here.  Whilst much of its online display activity is designed to attract potential buyers to its online shop, there is no doubt that the constant presence of O2’s blue and white imagery on the UK’s top 250 or so web sites helps to maintain and reaffirm its credentials as a player with a big interest in the digital space.  Would we still see O2 that way of we had never seen its distinctive blue online display presence?

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May 27th, 2009

Does TV advertising drive web site traffic?

The answer to this question is a resounding yes. In my experience  - and if you are running optimised TV activity - then you can expect to see web response rates to TV activity of between 0.1% and 1% (measured as site visits/TV impacts).  That’s between 1,000 and 10,000 site visits per 1 million TV impacts.  This is much higher than traditional phone-based DRTV where a good response rate is around 0.05%, with weaker campaigns performing at 0.005% or even less.  Of course one could argue that a click is a much less committed response than a person to person phone call and this is generally reflected in a much lower online conversion rate from click to sale.

What do these web response rates this mean from a cost efficiency point of view? If you are paying a £3.00 CPM for TV impacts then 1 million TV impacts will cost £3,000. At a 0.5% site visit rate from TV, we’d see 5,000 site visits. This gives a cost per visit of £0.60 (60p) each. That’s a reasonable cost per click when compared to online sources of click traffic - especially search engines.

The challenge  is to make sure that the clicks you generate from TV are high quality clicks, but this is becoming easier as TV fragments and targeting opportunities increase. So how do you optimise TV to web site activity?There are two answers to this question. One is optimising how you select and use TV channels and the other is how you manage traffic when it comes to your site. Were going to look at how you achieve these objectives in a mini series over the next few posts.

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February 24th, 2009

Using ROI metrics to evaluate Pay per Click search marketing

For many online advertisers, trading and evaluating paid search marketing (PPC) has now moved beyond paying for clicks.  More advanced search marketing campaigns are traded and evaluated on cost per “action” - i.e. paying for a marketing outcome; the generation of a lead, subscription or sale for example. Even more advanced campaigns are evaluated using Return on Investment (ROI) metrics where search engine marketing activity is optimised around the relationship between online spend and revenue generated.  ROI evaluation can be a very powerful way to evaluate paid search, but it is not without its own pitfalls. You need to be careful about which ROI metrics you work with - pick the wrong ones and your best endeavours may still end up generating high volumes of low profit business.

I thought it might be interesting to explore how we can look at ROI as a measure of margin or even profit.  But before I do that, here’s a quick review of current PPC evaluation 2options.

1) Cost per Click

Cost per click is the most basic and easy to obtain evaluation metric in search marketing. Unfortunately, clicks are of limited value for a number of reasons. First they do not represent whether or not a purchase has taken place. Second, they offer no view of sales value. Third, they are the metric by which most paid search campaigns are traded. Search engine owners want to sell you as many clicks as possible because they’re paid by the click. But you need sales because only sales will drive your business forward. So how can you move from evaluating search on clicks alone? There are two options:

2) Cost per Action

Cost per Action (sometimes called Cost per Conversion) is a much more interesting metric. It can be obtained using either the conversion tracking tool in Google’s main Adwords dashboard or via the Google Analytics tool. You can set conversions as particular actions “goals” or on your site. These might be sales, leads or subscription sign-ups. So if you have a target cost for generating lead or sale, conversion tracking can help you to achieve this. But there is a problem with looking at Cost per Action alone; it does not allow you to understand your revenue Return on Investment.

3) Revenue Return on Investment

Search marketing can only be fully optimised when you can understand the relationship between the cost of generating a sale and the value of that sale. If you are selling a product, or capturing online orders, then it is possible to capture the sales value from the forms generated on your web site. You can then use an analytics tools to look at the relationship between sales cost and sales value across either keywords, ad texts or products.

How do we develop ROI as an evaluation metric?

Calculating ROI in isolation of margins can produce superficially healthy feedback which in fact covers potentially disastrous business practice. ROI ratios can be used to help us understand the business metrics that keep businesses healthy - gross and net profit margins.  Here’s an example of three sales:

1) Sales Value: £200 Cost Per Sale: £50 Sales ROI: 400%

2) Sales Value: £600 Cost Per Sale: £100 Sales ROI: 600%

3) Sales Value: £900 Cost Per Sale: £125 Sales ROI: 720%

So, which sale would you rather have? In sale 1, the cost of the sale is 25% of the revenue generated. In sale 2, the cost of the sale is 16.6% of the revenue generated.  In sale 3, the cost of the sale is 13.8% of the revenue generated. Whilst the capital cost of sale 3 is much higher, it offers more potential profit because it’s a lower proportion of the revenue generated.

If you were optimising your campaign on a cost per sale basis at £75 per sale, then cutting out keywords or ad text that delivered over this level may mean that you miss out on higher margin business which offers better profitability. In a worse scenario, because revenue is flowing in, you might think that the relationship between ppc spend and revenue is healthy and bid for a higher share of the market. But this may be an online form of the venus flytrap;  the revenue may mask preilkously low margins or even loss-making business.

As a post text, there’s an interesting book about understanding the economics of generating sales in direct marketing by Peter Rosenwald, a former CEO of both Wunderman Worldwide and Saatchi & Saatchi Direct called “Accountable Marketing, The economics of Data Driven Marketing”.  Rosenwald attaches great importance to calculating and understanding your own “Allowable Cost Per Order” (ACPO) so that you can organise your marketing activity to deliver profits as well as sales.  Tim Ambler at London Business School takes these ideas further, arguing that marketers need to look at the rate at which cash is generated in relation to outgoing marketing expenditure.

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