In this edition of Marketers’ Pain Points, Quad’s Earl Potter discusses how to measure media performance to get the best return on ad spend — and to protect your media budget.
Q. In the catalog business, we used to have a very clean measurement system: We knew who we mailed to, who we didn’t — and we measured the different sales results. Now, as we’ve introduced other channels — mostly digital channels — our attribution model doesn’t seem to be working anymore. I don’t know if I should add a catalog or take one away. I don’t know the degree to which a specific catalog is or isn’t working, or whether it’s positive or negative from a ROAS or ROI perspective. Got any advice?
As web browser cookies disappear, Quad is seeing a lot of clients who are upside down in terms of their measurement — not just catalogers.
“Even though I would argue that cookies were never a great form of measurement, they gave people a degree of confidence,” notes Earl Potter, Senior Vice President of Media Analytics for Quad. The loss of cookies has spurred renewed interest in measurement generally, he adds. And one of the most effective tools for measurement is a media mix model.
A media mix model looks back at all your marketing outreach in order to plan future campaigns. It offers a way to get a handle on “incrementality” — the degree to which each element of your media spend contributes to sales.
That’s especially valuable in times of economic uncertainty, Jason Goldberg, Chief Commerce Strategy Officer at Publicis, told Modern Retail earlier this year. “People get more interested in incrementality when budgets are tight, they’re trying to control costs and they’re concerned about their profitability. So, in any economic downtime, you start looking at all spending more critically,” Goldberg said.
What’s involved in creating a media mix model? It’s a comprehensive process that brands need to undertake annually.
“Once a year, you need to throw everything into the mixing bowl. Everything you’ve done — all your tactics, all your investments, then all the things that have been done to you, as in competitors opening new stores, etc., to get a level set,” Potter says. Then you match that marketing inventory to sales.
For example, if you sold $100 worth of stuff, how does that break down? You analyze it and see that $80 is due to things you don’t directly control, like seasonality or a weather event that causes a spike in sales, whereas $20 is the result of things you do control — and of that, $5 is because of TV commercials and $10 of it is because of direct mail, and so on.
Developing a media mix model does involve challenges. The first is gathering, cleansing and formatting the media performance data needed to build a model. This information often comes from several different departments within a company, or from outside agencies. That means it can be incomplete or lack the needed level of detail. Quad frequently performs a data audit to help clients get a clear understanding of where their data stands and what steps, if any, are needed to establish a model.
The effort is worth it. One important benefit is that this measurement tool gives the leadership team a confidence level that you aren’t relying on hunches or anything subjective to plan campaigns, that you’ve rigorously looked at everything. And it frames what you’ve found in CFO-friendly language.
“The CFO needs to understand what the return on ad spend is,” Potter explains. “When the CFO comes down the hall and tells the CMO, ‘Hey, I’m cutting your media budget by 10%,’ and the retort is, ‘Oh my gosh, that’s going to cost us a billion impressions,’ the CFO’s eyes glass over. He’s going to say ‘Whatever, we need to cut expenses.’”
Alternatively, if the CMO cites data from the media mix model and responds, “That’s going to cost us $68 million in sales,” the CFO is likely to say, “No, no, that’s not what I want.” In other words, a media mix model gives CMOs the ammunition needed to defend their budgets.
“You’ve turned an expense — media — into an investment, and as an investment there’s a return, and you’re quantifying it. So, the best way for the CMO to have a conversation with the CFO is to have a media mix model in hand,” Potter advises.
Want to learn more — and continue the conversation? Reach out to Earl Potter, Senior VP, Media Analytics at Quad, firstname.lastname@example.org