In the digital age, there are more tools for measuring the results of your marketing spend than ever before. But which numbers should you be focusing on? Industry experts share top advice on how to measure return on investment (ROI) in marketing.
“There are three types of lies: lies, damned lies and statistics.” This famous quote, attributed to Mark Twain, could easily be applied to the myriad of different measurements and metrics available for online and social media-based marketing campaigns. Depending on the platform you are using, your business could be racking up views, page impressions, hits, click-throughs or even minutes watched.
But what do these actually mean, and more importantly, how are they affecting your bottom line? Industry leaders we spoke to agree: while the raw numbers such as page impressions can be useful, you need to make sure they are translating to real results (like more people buying the stuff you are trying to sell), and they need to be looked at in the wider context of your overall marketing and brand strategy.
Tama Sweetman, Interim Managing Director of industry body the Interactive Advertising Bureau (IAB New Zealand) says measuring ROI in digital marketing is the key to success but it’s not just about numbers; it’s about making meaningful connections.
“Traditional ROI metrics like conversion rates and click-throughs are important, we encourage businesses to
also consider the intangible value of brand exposure in brand-safe environments. In the digital age, ROI extends
beyond the financial aspects; it encompasses building brand loyalty and fostering relationships with the audience.”
Richard Pook, Chief Product Officer at dentsu Media ANZ, says broadly speaking, digital channels are more measurable than the traditional media ecosystem, but he warns that marketers need to make sure they are honing in on the right metrics.
“People do tend to be focused on vanity metrics, which might be a visit or a click, which don’t necessarily
mean a whole lot in the grand scheme of things.”
He says dentsu takes a “360-degree full-view approach” to looking at return on investment for marketing, which covers three key areas.
“One is real time data and attribution: understanding how your campaign’s performing, how many views is getting, how many clicks, how many conversions or visits, any of the metrics that you want to measure in terms
of direct response. In digital, because everything is measured, you can do that in real time.”
The second area dentsu focuses on in measuring ROI is incrementality testing or AB testing, which is a bit like a
science experiment: it involves putting a certain amount of spend or a certain amount of a campaign in a controlled environment, and then a test environment and seeing what the difference is between in performance.
“Again, in a digital ecosystem, you can do that more effectively,” Richard says.
“Even some of the big platforms allow you to do that AB testing; it’s relatively straightforward. Isolate a group of
individuals that aren’t exposed to the ad, isolate ones that are, and then test that in properly statistical, statistically significant sort of controlled environment.”
Broader measures needed
The third component is a “more holistic, broader view of your performance” such as econometric testing, market mix modeling (MMMs), or more narrowly focused medium mix modeling, Richard says.
“I think, again, the transition to almost being a 100 percent digital advertising ecosystem lends itself to be able to collect that data potentially more easily. For example, you can collect a lot of your ad data from your key platforms relatively easily. You can also collect a lot of your sales and performance data from your own business.”
Richard says these econometric measures are not just exclusive to digital data from your key platforms; they also
include all of your traditional marketing spend on channels like TV, radio, and newspapers/magazines, which can otherwise be hard to gauge in terms of effectiveness.
Then it also looks at sponsorship, all those types of things. Then the brand tracking metrics as well, as a determinant of sales or demand or however you want to measure success. Although these measures have traditionally taken time for results to show through, Richard says digitisation and automation in the space, through the likes of Tracksuit in brand tracking and econometric modeling through Mutinex, will give more up-to-date indicators.
“You’ve got a sort of ‘always on’ type approach to measurement, rather than a once every six months effort. By the time you’ve interpreted the results and internalised it all, then the world’s moved on and your model is out of date. It’s constant iteration, automation, agility.”
Even the traditional letterbox drop is becoming easier to measure thanks to digital technology, according to REACH Media CEO Struan Abernethy.
“In the letterbox space, you can set up things like vanity URLs for people to click on. This can help give you the whole offline/online picture, which is something that REACH really believes in. Again, call them old school, but QRs still work really well in this space as well.”
REACH has also had a lot of success out of pushing people to use a physical voucher and go into a store, an old-school tactic that Struan says is back in vogue after the Covidinduced period of isolation.
“Some of the most successful campaigns we’ve had even recently literally said “cut this off and walk into the store” and people do, because the fact is that the power of letterbox now, and post-Covid digital saturation, people actually appreciate and relish a good quality creative letterbox campaign,” he says.
“We’ve got research that shows that people will hold onto something for two weeks plus, before they actually capitalise on it, which is a lot of time to have your brand sitting on the fridge. That’s some real estate. Compare it to a newspaper, where the ad is in the newspaper and then the next day the newspaper’s in the recycling bin. Or if you’re scrolling online, you’re like a goldfish, you don’t stop that much, you don’t linger, it’s just move on to the next thing.”
However, Struan says REACH is “well aware” of the competition, in the measurement sense between traditional
and digital, and recognises the need for the product itself to continue to evolve. Without giving too much away, he says REACH is working on a “true attribution model” that will give more accurate performance metrics for letterbox marketing campaigns.
“That’s including a whole bunch of data insights and mobile targeting and all this sort of stuff that can go into
a baked attribution model for traditional media.”
At the front end, the targeting end, Struan the sophistication around what REACH does is already there.
“We can overlay shopping behaviours and household demographics and that sort of data to deliver targeted campaigns. We get the objection that, ‘we used to go nationwide with our letterbox campaigns, but we can’t afford to because of the price of paper’ and that sort of thing. But we can say, ‘well, you can still go nationwide, but we’re just going to get laser focused on who it’s going to and actually that gives you more bang for buck anyway, but it’s still giving you that nationwide coverage.’”
Evolving environment
“Transformation” is the biggest trend in marketing, as rapid technological change meets ever-shifting economic
conditions, Spark Foundry NZ Managing Director Nicky Greville says. The rising use and functionality of AI, combined with the move of traditional media such as TV and radio across to digital formats, mean “everything is digital now” and more and more things can be measured, she says.
“Media is everything, everything’s media, and so what we’re talking about really is ROI across the board. And every kind of agency, every marketer, needs a really solid backbone of ROI modeling now.
“If you are not planning for that big ecosystem in a connected way, then you are not really looking to the future,
which is not a decade away. It’s not five years away. It’s months. Where that’s heading in the future is into ‘live’, and there’s a whole heap of things that need to happen in order for that to be live and then predictive, but I view it as one really core function that you must have.”
Nicky says the sheer number of ways of measuring success in the digital age can be overwhelming, and marketers need to stay focused on what is really important.
“I think everyone’s a bit sick of metrics. We talk about outcomes instead, and I think that’s where measurement has to be and that’s why it has to be holistic, because our jobs are to grow businesses. If we think about that just really simply, you are going for that outcome, you’re not going for a vanity metric and that’s where everything is shifting.”
She predicts there will be “interesting roles” that will start to appear around the journey from insight to trend, as
the technology evolves.
“When is that moment? When’s the critical threshold? And that will be really tied to a business outcome based on what we know from modelling. There will be interpretation from insight to creativity and that relationship.
“So those are skill sets that are going to be really fascinating to see how they turn up in roles and people and
they’ll be precious. They’ll be really, really, really precious.”
Nicky admits that the “artistic scientists” she envisions for these roles, who combine analytical skills with creative flair, are probably only slightly more common than unicorns.
“It’s mind boggling. But I love that thought. So what are we teaching in schools that gets those kinds of people?”
Bigger slice of pie
These game-changing technological advances in measuring marketing ROI are taking place against the backdrop of a tough economy. While New Zealand has narrowly avoided recession this year, inflation remains above five percent and unemployment is starting to rise from near-record lows.
With the economic pie not getting significantly bigger, Nicky says businesses will tend to switch their attention towards taking market share from their competitors.
“There’s the real ‘steal share’ thing, and that’s predictable after every financial crisis. Everyone’s going, who are we getting share from? And what is that audience? But in order to get the right audience, you just kind of go, ‘who’s of most value?’” And what are you prepared to pay to do that? You need to know all your first-party data, you need to have it all ducks in the row, so it all comes back to action, transformative action.”
Nicky says another crucial trend in marketing is around advances in analytics allowing more predictive modelling, to pinpoint weak spots for rival businesses that can be exploited (or to protect your own).
“We are going from ‘this is what we think in terms of a set target audience’ and into ‘we can see that there is a capability for a competitor to come into this region or this street and take this. What are we doing?’ And that isn’t necessarily media, it’s maybe CX. And so that predictive to future action is here now, it’s just the setup to connect all those dots, which is the bit that I think will happen rapidly now.”
James Davidson, GM Planning at PHD Media, says ROI measures often don’t take into account other things like
pricing, competitors, economic factors, the weather or even holidays, all factors that can affect the results of a marketing campaign.
“And if you’re just looking at that, comparing it on a spreadsheet, you can say, ‘Oh, that’s better than that one,’
or, ‘That one’s more effective, let’s do more of those.’ But it’s only a fraction of what really happened, so it can be
quite problematic.”
James says there are other limitations when businesses just use ROI as their only metric to measure marketing success.
“It is a measure of efficiency, it’s not a measure of effectiveness. We’ve done some work recently with the client
to say, ‘hey, actually if you increase your spend by this, it would be less efficient, but you would be garnering or
delivering many more sales or more revenue,’ or whatever the KPI is on that.”
He says people can “game the system a bit” if ROI is their metric, by being super targeted towards people that are going to buy anyway.
“But if you actually want to grow your business and get more sales, which most businesses want to
do, not just do it efficiently, then you need to cast the net wider and be less efficient and focus on both the long and short-term effects, which aren’t typically picked up when ROI is that key measure.”
Competing channels
With new forms of social and digital media emerging all the time, James says the job of marketers and marketing agencies is not getting any simpler.
“I think back in the day, I joke with the team here, you used to be able to put a couple of spots on TV and go out for lunch and your job’s done. But these days, with all the channels, that convergence is going to come together so much, the way that different people use channels in different ways, you need to have that multichannel approach to everything.”
Although younger audiences in particular are moving away from more of those traditional channels, James says the efficacy of some of those social or scrollable channels that people are using is not as good at delivering long-term marketing effects.
“You need to really have that balance between them. I think over time there’s going to be more and
more channels added to campaigns and schedules, but then becomes a complication of developing the right creative assets to run in all of those, so it’s always just that balance of what you need to do.”
It’s almost impossible to read a marketing publication these days without AI being mentioned (this magazine
included), but James says the new technologies becoming available to marketers will bring a “democratisation” of marketing measurement.
“The lowering of the barrier for entry for brands to do MMMs or econometrics or the ability to collect data, or using AI, or any of those other tools to help make that process better, I think can only make marketing
more effective.
“The more brands that move away from last click attribution or focusing purely on ROI metrics or easy-to-measure metrics, to actually what are robust statistical techniques to measure how campaigns are performing, I think it’s a huge trend that’s probably not too many people would think about because it’s not that interesting, but I think it could actually have a big effect.”
This article was first published in our December/January 2023/2024 issue.
