Why marketing should be made to measure
It's a fight for budget allocation, and marketers need to prove their worth. But today, says Paul Rowlinson, Managing Director of GroupM Digital UK, there are modern tools they can use to solve the age-old issue of measuring the impact of ad spend - as long as they're willing to update their methods.
CMOs are feeling the pinch after the third quarter of 2019 revealed the first cut to marketing budgets in seven years. Already under heavy pressure from the C-suite to provide clear evidence of their contribution to business success, CMOs must now achieve greater results with reduced budgets.
There are however more ways than ever before for advertisers to enhance the precision of their media investments and deliver maximum business value. If, that is, they are willing to adjust their current approach to measurement and move from long-favoured proxy metrics to more precise, outcome-based analysis.
To ensure CMOs effectively boost the performance of their business, marketing evaluation and the activity it informs must be “made to measure”.
A click is never enough
Much of current marketing analysis is based on insufficient methods and assumptions. Often traditional measures such as click-through rates (CTR) and cost-per-click (CPC) are used as standalone metrics to decide whether an ad campaign has met marketing objectives.
But while these metrics have their uses - as an indicator of engagement or within tailored performance marketing campaigns - they don’t track what matters most to modern marketers: the exact impact their efforts make on the bottom line of the business. In fact, when used as proxies for key goals such as sales, they can be highly misleading.
For instance, say an ad campaign is promoting a high-end product such as a car. Well-chosen messaging and positioning might mean the ad fuels multiple clicks and achieves an impressive CTR. But it’s extremely unlikely that any consumer will go straight from clicking the ad to making an instant purchase decision on such a sizeable investment.
Relying on CTR alone misrepresents the impact of ads and generates an imprecise view of performance that doesn’t stand up to scrutiny. And for CMOs, this only heightens the struggle to prove their value and present a compelling case for budget allocation.
The promising news is that recognition of the need for evolution is starting to grow. A 2018 Xaxis report covering 5,000 digital marketing managers found only a third (31%) felt their primary advertising measure was “very effective” and 71% agreed the difficulty of analysis had risen sharply in recent years.
But more importantly, the vast majority of respondents were also keen to update existing practices, as well as improve the correlation between campaigns and business results. Over 70% aimed to change their core metrics in the immediate future, while 86% had a specific vision of which direction marketing measurement and spending should take: planning to increase their investment in outcome-driven media during the next 12 to 24 months.
The technological fix
Marketing professionals are aware of the flaws inherent in conventional assessment, especially the limitations of proxy measures. Many are ready to disrupt the status quo with new metrics and a greater focus on outcome-centric activity. The question is, what should their step be?
In short, marketers and their agencies must work together to tie campaign evaluation more closely to business objectives. At a deeper level, this means gauging their success against custom KPIs that are carefully chosen to track measurable actions and align with desired brand outcomes; whether that’s higher awareness, recall or sales.
For example, where a retailer that is interested in attracting more customers in-store may set their measure as footfall, a business centred on increasing online interaction might select cost per in-target reach, cost per incremental visitor or cost per engaged visitor.
Whatever the ambitions of each brand, marketers can harness a range of tools to increase their chances of hitting the right mark. Recent advances in smart technology, attribution modelling, and econometrics have made it easier and faster to set tailored metrics for every campaign, with help from analytics, media, and creative experts.
AI in particular has supercharged the ability of marketers to target ad spend as efficiently as possible - directing precious budgets at only the most relevant placements, with the greatest likelihood of driving maximum audience resonance and meeting objectives.
CMOs are feeling the squeeze from multiple directions; facing a tougher fight for their share of budgets and increasing demand to prove their value. But there is a clear way forward. Marketers at every level are beginning to appreciate the importance of demonstrating their impact in a way the C-suite understands; drawing a defined line between marketing results and wider business goals.
By harnessing the growing array of sophisticated tools and talented staff at their fingertips, marketers can create the right metrics for their needs and deliver returns that truly impact business outcomes.