Mark Ritson: Revenue is a lousy measure of success for most ad campaigns

Many variables affect sales, which don’t always correlate to how good your ads are. The only way to measure campaigns effectively is against the metrics you want to change and the time you need to do it in.

revenue measure adsThis year has begun pretty much the way 2018 ended, with a spate of big advertising campaigns that have divided the marketing community. Kaepernick for Nike. Elton John for John Lewis. Not to mention a certain razor commercial/public health broadcast for you know who.

Time and again the marketing community is split, apparently down the middle, about the commercial efficacy of the campaign in question. We discuss, we debate and then agree to wait until the sales figures are announced.

READ MORE: Mark Ritson: Gillette’s new ad will trash its sales and be the year’s worst marketing move

At face value, using the future fiscal performance of a brand as the ultimate measure for whether an ad is good or not does make sense. Aren’t we here, ultimately, to increase the revenues and profits of the brands we market? What better measure could there be than sales?

While it’s true that marketing’s mission should always ultimately be to find customers, increase revenue and generate more profit, there are some significant issues with using sales as a measure for advertising success.

The quarterback exception

Patrick Mahomes may not be a name you are familiar with, but over in America at the moment he is among the most famous athletes in the country. Mahomes is the quarterback for the Kansas City Chiefs American football team. Last weekend the 23-year-old displayed composure and capability beyond his years to produce a sparkling performance in the AFC Championship game – the qualifying match to see who will make it to the Super Bowl

Mahomes threw the ball for a total of 295 yards during the game, with more than half his passes caught by his team mates. That spectacular performance, under the intense pressure of a big playoff game, earned him a quarterback rating of 117. The average last season among his fellow quarterbacks was 88, giving you some sense of just how well he played.

But the Chiefs lost and will not be going to Super Bowl LIII. Despite Mahomes stellar offensive plays, the Chiefs’ defensive unit played relatively poorly during the game, allowing their opponents to score a whopping 37 points against them including an all-important final touchdown to clinch the game in overtime.

You may have no interest in American football but the story is a perfect metaphor for marketing. Turn Mahomes into advertising and make revenues the equivalent of the final score in the game. The young quarterback played out of his skin, but his defensive teammates weren’t performing at anywhere near his level.

Revenues don’t belong to you, they come from a competitive tussle in the market that depends as much on rivals as it does your advertising.

Advertising, like a quarterback, is a very important contributor to any ultimate commercial success but it’s not the only variable in the calculation. If a company’s price is set too high, for example, or the product has fundamental quality issues or design flaws, no amount of great advertising will save the day. It might even speed it’s decline.

One of the givens of the Kaepernick campaign was that Nike had a great array of products, distribution and pricing to enable enthused customers to go out and buy stuff with a swoosh. It’s an obvious point but, all too often, when communications burns brightly, other aspects of a brand’s offer rarely achieve the same levels. Revenues don’t grow the ad is blamed for the miss when its performance was one of the few elements of the marketing mix that was done well.

The competitive context complication

There was another reason the Chiefs lost last weekend. It’s called Tom Brady. He is the quarterback of the New England Patriots, who outplayed the Chiefs in a thrilling and ultimately overpowering manner on Sunday. One might even argue that while the Chiefs played well, the Patriots simply played better.

In the same way, another confounding issue in using revenues to assess advertising is that even when an ad performs brilliantly, the subsequent sales numbers are as much a function of competitor activity as your own marketing tactics. Elton John could have pulled every heart string in Britain in December, but if Amazon had outspent John Lewis in advertising terms the impact of the John Lewis ad would have been significantly lessened. Not because the campaign was poor but because a competitor outmatched the spend or creative, or both.

And it does not always have to be a superior competitor that robs advertising and marketing of its expected glory. One of the best marketing campaigns I ever worked on was scuppered because our idiot competitor responded to our initial success by dropping its pants on price to a ridiculous level.

That tactic had three ultimate effects. First, our foolish rival took almost all the market growth. Second, it did so at a price that was unsustainable and eventually forced it out of the category in our country. Third, its foolhardy efforts made my client look – at least from a superficial point of view – even dumber than the idiot competitor, which now had three times our market share.

Whether they are geniuses, foolish or something in between, competitors have a very annoying habit of doing stuff while you’re doing stuff. And that stuff tends to impact revenues just as much as – sometimes more than – your own strategy and executions.

The fancy word for this is exogeneity. The simpler version is that revenues don’t belong to you, they come from a competitive tussle in the market that depends as much on rivals as it does your advertising.

The dreaded ‘T value’

Another manifest issue of using revenue as the benchmark of advertising impact is the always slippery issue of time horizons. When exactly are we going to start counting the revenue impact of the campaign? And when do you propose that we stop?

Researchers Peter Field and Les Binet make a very strong case that many of the major effects of advertising can only be assessed two or three years after the execution has been aired. That makes revenue estimates doubly problematic. First, because you have to be sure that some of the revenue bump you want to claim is not a causal hangover from a previous campaign. Second, depending on the category you operate within, it could well be a matter of years before you can make a proper estimate of your total revenue impact.

Timing is a particularly problematic issue for Gillette’s new campaign, ‘The Best Men Can Be’. It’s entirely plausible that the initial effect of the campaign and its broad coverage, salience and sudden support from women and other engaged consumers could send sales up in the short term.

As the initial bump fades, however, there is an equally plausible argument that disaffected Gillette consumers will jump ship when they next need new blades and this could result in the brand losing share in the medium term.

Then, as younger consumers join the category, the modern version of ‘The Best A Man Can Get’ begins to restore share and ultimately grow the brand’s revenues. Another equally plausible scenario has Gillette losing 4% share in 2019 and an army of haters proclaiming this ‘toxic masculinity’ campaign a total disaster. In truth, Gillette has been losing this share annually in America for the past half-decade.

Whatever the strategic objective, that goal must also become the measure of success.

The moment when you actually make the assessment of revenue impact is almost as important as the campaign itself. I once went on a massive flashing bender in Manhattan with the boss of a very high-end luxury brand who told me, during a very indiscreet cigarette mid-way through our session, that we could literally stand there on 5th Avenue chain smoking for the next 12 months and we’d still look like geniuses to all and sundry.

My wily boss had worked out that a combination of newly restored economic growth, a very good slow-burning marketing effort by his predecessor, combined with rapid restocking by our wholesalers, meant that sales were bound to grow in double digits and we were certain to get all the credit irrespective of what we did with our marketing budget for the year.

All too often we look at the moment an ad was launched and take that as the starting point for the trajectory of the brand’s revenue. In truth, advertising is usually the corporate equivalent of a match strike: gone in a brief and tiny puff of smoke.

It takes a rare and enormous outlier of a campaign to independently and immediately move the revenue needle into the black or red. That can occasionally happen. But more often, bigger lurking variables precede the campaign and provide the real explanations for revenue growth or decline.

What’s to be done?

If revenue is such a fallible metric, how are we meant to asses an ad’s impact and effectiveness? Ultimately our goal might be revenue but to achieve that goal most campaigns rarely set out simply to sell more stuff to more people.

Bottom-of-funnel, short-term campaigns might have exactly that purpose and in those cases immediate sales jumps can and should be used. But more usually a campaign identifies the correct strategic levers to be pulled to eventually drive revenue and profit growth. It might be an increase in consideration, a decrease in price sensitivity, or an attempt to generate better levels of brand preference.

Whatever the strategic objective, that goal must also become the measure of success. If you created an ad to change the perception of the brand and eventually increase sales, then set the perceptual shift as the measure of your campaign’s success.

That means three very important things. First, you need decent pre-campaign benchmarks to show the target levels of consideration or preference your brand enjoyed prior to your campaign, to demonstrate (hopefully) a shift in that metric post-campaign. You don’t get a time machine as part of your marketing tool kit. It’s no good getting excited over 35% consideration among the target segment if you don’t know what it was before you ran your ad. It might have gone down.

Second, you have to be incredibly clear what level you aim to achieve for your chosen benchmark. Simply aiming to increase brand awareness will not do. What did you explicitly mark as the success level you wanted to achieve for your marketing investment?

Finally, you have to add the ‘T’ variable and specify the time period when your objective will be achieved. It might be Q1, mid-year or at the end of the financial year. But when is this result going to be achieved and when will you re-measure to prove the progress?

READ MORE: Why we can’t give up on the ‘science’ of advertising

It’s not rocket science but a well-run campaign is clear on the strategy and the goals that it has set itself. It has benchmarks to prove the problem and also to set the context for any post-campaign improvement.

Yes, it is ultimately all about revenue. But this is a lousy measure of performance for most ad campaigns and an even worse diagnostic for post-campaign assessment.

Advertising is not the only variable to drive revenues. Competitors have a big impact on your market performance. And time can make revenue returns very hard to isolate and predict for even the best campaign.

Measure the success of a campaign on its ability to deliver on the strategic objectives you set out to achieve when you created it. The only way to assess whether Elton sang the blues over Christmas or ended up being a rocket man for the brand is to ask John Lewis to outline the strategic objectives for the campaign and whether those objectives were achieved on the appointed date, versus the pre-Elton levels from October.

While there is a brutal logic in linking ads to immediate revenue changes, it’s the wrong approach to apply.

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Comments
  • Mark Thornton 24 Jan 2019 at 9:30 am

    Great article Mark. Ries and Trout’s ‘Law of Perspective’ (what works in the short term rarely works in the long run) comes to mind here. But the key phrase you use is “In truth, Gillette has been losing this share annually in America for the past half-decade.”. Gillette was damned if they do, damned if they don’t, so they decided to ‘do’. In a world in which anything you want is a drone-delivery away from saying a single word into your phone, you’d better have a strong emotional connection to override that urge. That takes risk, and the sacrifice of short term sales for long term emotional connection. The only ‘risk’ to Gillette is losing nerve along the way. But then, surely only a Gary Vaynerchuk would be worried about down-votes on a Youtube ad 😉

  • Nichola Bushnell 24 Jan 2019 at 8:53 pm

    Good article Mark, It’s tiresome pushing the same argument; revenue versus marketing success, when all marketing metrics were up again this year, and significantly on previous years. Clunky website/purchasing portal (not managed by marketing) with shockingly represented material, we’re talking films; dreadful synopsis, titles, hero images (or all 3), and ineffective purchasing functions from partner venues were the issues. My head is sore and the dent in the wall, deeper.
    Onwards to new challenges.

  • Pete Austin from Fresh Relevance 25 Jan 2019 at 2:14 pm

    @Mark Thanks for “Ries and Trout’s ‘Law of Perspective’ . https://ericsink.com/laws/Law_11.html

    It’s the converse of my favourite marketing advice, which is that almost any damn fool idea will work for a short time, because of the novelty effect.

  • Hemant Patwardhan 25 Jan 2019 at 10:26 pm

    None of this is new. This is stuff that has been taught for years. C’mon Mark Ritson, I expected some deep insights here.

  • Marlene Greenhalgh 27 Jan 2019 at 12:26 pm

    “No man is an island” John Donne.
    No product is an island. Job done.

  • Mark Cichon 28 Jan 2019 at 6:08 am

    In the FMCG world there are about 10 growth levers, advertising / mental availability is just one of them. Their competitors are crowding the marketing, allowing easy distrubution / access, outstanding pricing and competitve product quality. My guess is that Giltette did a thorough diagnostic around the levers and came to the conclusion that advertising is their biggest bet as a growth lever. Now lets see if they got it ride ..
    ps: I switched to Wilkinson Sword about a year ago, and why, better product (never cut myself, unlike with Gilette shavers) and a sigficantly lower price. No brainer.

  • Richard Vaughan 5 Feb 2019 at 5:03 pm

    Absolutely agree with this. I was involved with a re-positioning campaign and we refused to use revenue as the measure. Instead we set the current benchmark, set goals for the campaign used average order, lost sales feedback and lead/quote/sale conversion rates as measures. Our campaign was a success delivering improvements in all those measures. As a result, revenue did improve, but not exponentially with time.

  • Sebastian Franck 6 Feb 2019 at 6:11 am

    It is interesting to compare the media kerfuffle about how the Kaepernick ad drove record sales for Nike with what CEO Mark Parker says about the advertisement in the latest earnings call (yes, I read that kind of things, it is far less boring than it sounds. You should try it, you might learn something) – i.e. Nothing at all. He talks about the record results and ascribes them to their succesful direct-to-consumer play, strong athlete performances, new product launches with a healthy dose of innovation and a refresh of the Air Jordan brand. Plus a lot of other things to do with digital and innovation. No mention of advertising. Sorry guys.

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