One of the world’s first advertisers, John Wanamaker, famously said over 100 years ago that ‘half the money I spend on advertising is wasted, the trouble is I don’t know which half’.
Advertising has always been about driving sales but as an advertising industry we now think in terms of ‘brand’ and ‘performance’ campaigns. But the reality is that both are striving to deliver the same thing – more sales, revenue and ultimately profit for the advertiser.
For digital advertisers in the 21st century that are familiar with performance marketing, the John Wanamaker quote may come across as dated and even irrelevant. With access to more marketing and media data than ever before, many performance marketers will claim to know the audiences, keywords, creative executions and user journeys that best work for their brand and audience. We are very used to seeing how our campaigns perform in real time, and many will claim that visibility on their key performance metrics results in advertisers knowing exactly what is working to drive sales – and at a very granular level.
But is that view accurate?
The dominant form of assessing success in performance marketing is to use digital attribution models that generally report and optimise against metrics like sales or revenue. It is these models and their associated data inputs that give digital advertisers a rationale for their media budgets. After all, if your ad campaign is driving sales at a cost-effective rate, then what’s the problem?
The problem is often two-fold and centres around opportunity cost. Do performance marketing campaigns hinder consumer brand perceptions and therefore long-term growth? And does investment in the highly trackable performance channels pay back at a greater rate than other investments that the business may make? These investments could include offline or brand building media as well as non-media investments like proposition and personnel.
The reality is that most of the channels and techniques used by performance marketers are generally considered to be ‘spammy’ by the consumers they are designed to engage with. This often leads to a bad user experience where users are bombarded with ads that annoy rather than engage. When performance marketing campaigns are executed badly they have been accused of ruining Christmas and can seriously damage both advertiser and publisher brand reputations when deployed without an understanding of user context.
In these examples, the performance techniques used may have driven some short-term sales to the users that the ads resonated with, but they are also likely to have negatively impacted longer term sales to other users who were upset or offended in receiving such communications. This is especially the case as negative brand interactions tend to get played back to our friends and family, creating a vicious circle for the brands that launched the campaigns.
But perhaps the bigger issue that impacts every performance advertiser is one around incrementality. Simply put, did the performance marketing campaign play an active role in driving the sale, or did it merely track the sale? There is a huge difference and most advertisers do not yet think in these terms.
Most consumer purchase behaviour is habitual and highly predictable. Our rich data sets increasingly allow algorithms to deliver ads to the users most likely to convert in order to deliver the best KPI results (i.e. return on investment (ROI) or cost per sale (CPA)).
But very often those high ROI / low CPA placements are having the lowest form of incremental uplift to the advertiser. In many cases the ads can be seen to be preaching to the converted and taking credit for latent consumer behaviour.
In addition to this point, even when performance ads do drive a genuine positive impact in driving sales, it needs to be recognised that performance ads are generally most effective as part of a multi-channel campaign that supports both brand building (including offline media) as well as short term sales driving performance channels. This creates a challenge in terms of sales attribution – how much credit should go to the touchpoints that aren’t in the attribution model?
The Circus Street Performance Marketing lesson will explore these points in more detail and will help you better understand how performance marketing can be used to drive true media effectiveness. In these lessons we explore what performance marketing actually is, how it can be used to benefit businesses and how performance channels work together to chaperone customers through the customer journey. We also look into the importance of customer behaviour change, and attribution modelling’s inability to recognise it and show you how to use econometrics and other measurement techniques alongside attribution modelling to best understand media effectiveness.