The digital marketing category has opened businesses up to new opportunities and challenges. While marketing now has the capability to reach more customers, procurement now has the numbers and visibility of the supply value chain for the marketing category. However, the digital revolution has also handed the procurement function a chance to reset historical squabbles and confrontations with colleagues in marketing.
So, what can business executives expect from these frenemies?
“Well, for one thing, they should be measuring digital advertising’s return on investment (ROI) by tracking metrics that impact directly on profit and revenue”, says Simbarashe Msonzah, Independent Procurement Consultant and Executive Committee Member of the CIPS Gauteng Branch.
In this month’s SmartProcurement, Msonzah looks at some of the metrics that need to be put in place to determine ROI for programmatic advertising, mobile video ads and native advertising.
A few years ago, when digital media still constituted small spend, it was seen by businesses as developmental, as such marketers and category specialists did not measure key performance indicators (KPIs). This is because most of us did not fully grasp the new business model and key success factors. With increased spend and new market entrants in the digital design and media space, there is a desperate need for businesses to systematically identify, develop and track critical success factors (CSFs) and KPIs, not just measuring a campaign by the number of visitors alone. Failure to map digital content to revenue has complicated ROI calculations for the digital spend category and its contracts.
By having the KPIs and numbers on each channel and supply chain, category managers can move to cheaper and more effective marketing channels, based on performance for example, categorised customer count and buying behaviours, resolution speed and the cost per channel. However, the rate of new applications has meant that marketers and category managers must continually recalibrate the alignment of KPIs with overall business goals and collect the right data to measure the indicators that matter.
Consider adopting the soft metrics discussed in this article to better your understanding of ROI indicators in terms of programmatic advertising, mobile video ads and native advertising.
1. PROGRAMMATIC ADVERTISING
Owing to the flexibility and variety of programmatic advertising, best-in-class category managers develop metrics on the following, which must be measured continuously:
Web traffic: if digital marketing spend is producing value, the number of web visits to a website should reflect that as customers download and use applications, type the company’s website address directly as well as conversions from adverts to online sales. This means that websites must now go beyond information and promotion to commerce to extract value and maximise ROI.
Reputation and recognition: while many specialists obsess over brand recognition on social media, for example likes, retweets and comments, it is important to see whether the likes convert to sales. This should be measured against past events and competitors. However, beware of farms that “like” as a service, as some campaigners use these services to increase their visibility on search results but with no inherent commercial value.
2. VIDEO ADVERTS
With the influx of homemade videos on Instagram and YouTube, which go viral, we need to reflect on how we measure success and the cost thereof. It is no longer true that a bigger budget on a video advert leads to better results. Global fame is no longer a privilege of the big brands with big budgets. As a result, the below metrics should be considered:
Revenue impact: first-touch attribution should be analysed, looking at sales before, during and after video campaigns to estimate ROI. Videos are generally expensive, hence, a sound business case is a must for budget or channel approval. There is, however, a complication: as in the case of movies and music, the lifespan of a video is getting shorter by the day, it is literally “15 minutes of fame”.
Awareness: how many customers follow and search your videos by using the #hashtag and name?
Accessibility: while it’s not print advertising and there are no front and sports pages, adverts must be viewable across many devices, even more so on mobile. Unfortunately, many media houses place only a handful of adverts on one page, making navigation cumbersome. There is a direct relationship between the visibility and accessibility of adverts with awareness and revenue.
Share of the mind: how many people are talking about your adverts and, in turn, your products? This is difficult to estimate because many discussions happen offline. It may thus be useful to have ‘opinion leaders’ in the form of celebrated personalities or so-called ‘influencers’ to measure if discussions can be ignited in their following. The cost of video, channel and celebrity endorsement can then be compared to establish the best ROI.
3. NATIVE ADVERTISING
Native advertising is subtle and that makes it even more difficult to measure ROI, even though you can monitor click-through. The key questions must be: is your target marketing correct? Can the landing page hold attention? Most importantly, how much traffic does the content marketer have as well as trust from customers to accept referrals and recommendations from their site?
Customer acquisition: how many customers submitted their contact information out of all of the people that visited a site via recommendation? This can be compared year-on-year so that content providers can provide/benchmark performance.
Reputation and recognition: the ROI of this approach may be measured partly by the number of people who accept to be added to a mailing list or subscription. It suggests that the advertiser is seen as an expert and the information and brand are seen as reliable, even for further reading and reference. A decline or sluggish growth in the subscriber base can be used to calculate ROI.
Category managers are finding common ground with brand managers by utilising innovative ROI metrics via digital tools. Artificial intelligence and big data are changing how marketers and procurement specialists present their business case, procurement plans and reporting. Predictive technologies, which attempt to predict patterns and trends, can be used to constantly check the validity of the business case for different campaigns and channels throughout the lifecycle of ad campaigns by questioning the drift and gaps between initial plans and expected performance based on current data. Some ad campaigns will be dropped instantly, while others will play on longer because numbers do not lie.