‘It’s about long-term value’: How brands are tackling effectiveness measurement
As new DMA research claims a 23% decline in marketing effectiveness and an overreliance on “vanity metrics”, marketing bosses at WW and Salesforce explain their approaches to measurement.
All marketing effectiveness metrics must “ladder up to long-term value” and take into account the “big picture”, marketing bosses at WW (formerly Weight Watchers) and Salesforce have said.
Their comments follow the release of research by the Data and Marketing Association (DMA) suggesting a dip in marketing effectiveness since 2020, and a “bewildering” over-reliance on campaign delivery metrics instead of true brand and response measures.
“[Every measure] has to ladder up to the long-term value of those customers you’re bringing in, how much you’re spending, the effectiveness of that channel, and ultimately, what it actually means,” said WW’s vice-president of growth and performance marketing and DMA awards committee chair Tony Miller, speaking at the organisation’s Making Measurement Meaningful event this week.
Miller added marketing effectiveness isn’t “just about the return on investment” (ROI) of a campaign, despite being an “important” measure. He added that marketers need to include brand and response measures when determining the effectiveness of their work.
Covid has made brands “very focused on short-term campaign strategy”, Miller said, but those that can find a balance between long- and short-term metrics will be far closer to finding the “holy grail” of measurement.
That’s why Miller and his team have been trying to “stretch” WW’s focus into a conversation of “volume and value”, bringing in long-term metrics and the need to invest in the “upper-funnel” to make performance activity work “harder” and “more efficiently”.
The industry isn’t putting enough focus on the metrics that matter. Only 59% relate to meaningful response, brand and business effects.
Ian Gibbs, DMA
He believes models like multi-touch attribution (MTA) and marketing mix modelling (MMM) can “help unlock the true long-term value to CAC [customer acquisition cost]” enabling brands to invest appropriately across the right channels.
Separately, Salesforce product marketing director of EMEA, Jonathan Beeston, said it is important to remember that every individual campaign by a brand sits within a “much bigger” marketing strategy.
“I think that’s the most important thing,” he said. “You’ve got to define and figure out how you measure how individual campaigns fit into that.”
Beeston added that with “more and more” CMOs now taking ownership of the entire customer experience, from advertising to in-store experience to call centres, there is now a need to “change our language” around metrics, so marketers can easily communicate with different stakeholders around the business.
That also requires opening up effectiveness metrics and data to the business’s other departments and its agencies, he said.
“Marketers need to get their head around this. If you really want to understand how something is affecting your long-term customer relationships, retention, etc, it’s really essential you make [the data] available and useful to people within your department, but also to all your agencies.”
With the world changing “rapidly”, particularly now as countries exit the pandemic and face new challenges of inflation and a cost-of-living crisis, it is also important that marketers are constantly testing and re-evaluating their measurement practices, Beeston added.
“Even when we look into the next few months, the macroeconomic scenario is changing considerably. Consumer behaviour is changing, maybe in a way we don’t want it to because of that. If you’re not totally testing and re-evaluating what’s going on, what worked last year may not work this year.”
If there was a marketing effectiveness ‘crisis’, it’s now over
Ditch the vanity metrics
The DMA’s research, conducted in partnership with Salesforce, suggests marketing effectiveness declined by 23% in 2021.
The organisation analysed insights from the more than 1,000 past entries to the DMA’s awards, dating back to 2017. Of these campaigns, half had a pure response focus, a quarter had a pure brand focus, and a quarter had a dual objective.
The average campaign generated 2.4 effects in 2021, down from 3.1 effects in 2020.
An analysis of the role of response and brand effects reveals a marginal improvement in the brand effectiveness of campaigns, up from 0.5 to 0.6 brand effects. However, this increase was outweighed by the decline in response effectiveness over the same period, from 2.1 to 1.6 effects.
While the research’s author Ian Gibbs, founder and measurement consultant at Data Stories Consulting, admits this analysis does not take into consideration the size of effects, he said it nevertheless indicates a trend of declining marketing effectiveness.
This is likely due to a number of factors, including a shift towards short-term campaigns over the pandemic, Gibbs explained. The percentage of awards entries that were short-term campaigns rose from 43% to 53% in 2020, and was maintained in 2021.Marketing Week, ISBA and IPA team up to explore marketing effectiveness
Customer retention also became a more significant ambition than customer acquisition, the analysis shows. In 2020, 53% of campaigns had an acquisition-based objective. That figure has now dropped to 45%.
“Retention is important, but when it comes to driving response, there’s only so much you can sweat your existing customers dry,” Gibbs explained, pointing to research by marketing science institute Ehrenberg-Bass, which has shown customer acquisition is the best strategy to drive growth.
Indeed, acquisition campaigns were “marginally” more effective than pure retention campaigns in the DMA’s analysis.
Gibbs added that the measurement of advertising effectiveness is “harder than ever”, as third-party cookies are phased out, a current lack of cross-platform measurement in a “multi-platform world”, and so much data hidden in the walled gardens of Facebook and Google.
However, this is compounded by the “bewildering” number of metrics marketers are using to measure the effectiveness of their work. The DMA’s analysis found 170 measures used across its awards entries.
“That’s a bit of an eye opener and certainly bewildering,” Gibbs said. “How are we supposed to come up with a coherent and consistent way of talking about the 170 different ways in which we are doing [effectiveness measurement]. Of course we have to accept that every industry is unique, every campaign is unique – that’s fine. But I think we can still come up with some commonality.”
[Every measure] has to ladder up to the long-term value of those customers you’re bringing in, how much you’re spending, the effectiveness of that channel, and ultimately, what it actually means.
Tony Miller, WW
Of those 170 measures, 41% relate to campaign delivery metrics, or “vanity metrics”, such as impressions, click-through rate and engagement. This picture has remained stable between 2017 and 2021, which indicates that “no significant progress” is being made in how the industry measures campaign impact, the report says.
“There’s far too much of a focus on the stuff that doesn’t really matter,” Gibbs said.
Breaking down the remaining 59%, 36% were response measures, 17% were brand measures, and 6% were business measures. While the number of brand measures rose from 13% for the years between 2017 and 2020, business measures has dropped from 10%. According to Gibbs this is an “issue”, as business measures are those that are most aligned with the language of the boardroom.
He added: “The industry isn’t putting enough focus on the metrics that matter. Only 59% relate to the meaningful response, brand and business effects. So we really need to shift our thinking towards these.”
On the other hand, research conducted by econometrician and founder of Magic Numbers Grace Kite earlier this year suggests, based on the ROI of ordinary, unawarded campaigns, that “currently there is no crisis” of effectiveness.
The average return on investment in recent years is £3.80 in revenue per £1 spent on advertising. ROI declined between 2005 and now, particularly in the year of the Brexit vote. But by 2019 ROI had risen back to at least where it was in 2005.