Advertising agencies have yet to resolve John Wanamaker's century-old dilemma-"I know half my advertising is wasted, I just don't know which half"-but with a softening economy and the current emphasis on integrated marketing, they are out to prove a good more than half their advertising is effective.
Several agencies, including Grey Global Group, Interpublic Group of Cos.' McCann-Erickson WorldGroup and WPP Group's J. Walter Thompson are boosting their ability to measure advertisers' return on investment, and in the current economic landscape, any tool that brings marketers closer to grasping ROI is seen as an advantage.
"Wall Street's pressure on individual companies to deliver earnings that are accurate and increase every quarter puts enormous pressure on companies to be able to quantify their return on investment," said Bob Berenson, VP-general manager for Grey Global Group.
New tools that measure the effectiveness of integrated campaigns also may aid agencies, which are eager to prove to marketers their money was well spent, which in turn would help guard against slashing of marketing budgets in the face of a slowdown in consumer spending.
Additionally, now that much of the industry's growth is projected to come from marketing services rather than traditional ad services, ad networks want to convince clients to strategically spread their ad dollars across their myriad communications divisions.
Eric Einhorn, executive VP-marketing director for McCann-Erickson WorldGroup, guides McCann's measurement program. "The idea came from a client request. They said, 'You have all these marketing-services companies, now tell me where to spend it.' " McCann's answer was the September launch of Brand Optimization Map and Fusion 2.0, which took three years to develop.
To begin, a client meets with representatives from McCann's marketing services disciplines-such as advertising, public relations and direct marketing-to set brand goals. Then the group focuses on what McCann defines as the seven universal marketing drivers that link all integrated communications plans. (McCann declined to reveal the whole list, but one driver, for example, is brand loyalty). The group then assigns a numerical value to each marketing driver based on how essential it likely will be for reaching overall brand goals. Taking those values, the capabilities of McCann's various disciplines and the client's overall budget, the Fusion 2.0 software calculates how much of the budget should be allocated to each discipline.
If McCann's tools conclude a client's funds should be allocated differently among communications disciplines, McCann-the owner of all those disciplines-hangs on to the revenue. However, if a client evaluates spending levels for both its McCann and non-McCann communications companies, the results potentially could steer revenue out of one agency's pocket and into another's. "All companies have funds they can draw on for the right opportunities. If we can show the benefits of an integrated program, we will draw on those reserves rather than rob Peter to pay Paul," Mr. Einhorn said.
To measure the effectiveness of its plans, McCann determines the client's "Brand Clout" index before and after a communications program takes place, based on consumer questionnaires focusing again on marketing drivers. "It's diagnostic and directional, so in theory we can measure payback," Mr. Einhorn said.
According to McCann, current clients who have used the new measurement and planning tools include General Motors Corp., Microsoft, Pfizer and London-based telecommunications company Cable & Wireless. McCann clients pay a fee to use the tools.
Kerry Foods, a Tralee, Ireland-based company represented by McCann in the U.K., has used McCann's new tools to define brand problems, develop a strategic plan and define the level of investment for each discipline.
"Not all agencies we use are part of McCann," said Ruth Tobbell, marketing director for Kerry Foods, "but we all got together for a day to input into the model, understand and agree on what our business issues are." Ms. Tobell said the tools worked "enormously," providing a common framework from which all the Kerry agencies could work.
"One of the difficulties we had in the past was despite the fact that all agencies were working toward the same brand objective ... they each had different interpretations of what they would do to best solve them," Ms. Tobell said. Though Kerry has not yet reached the stage of Fusion 2.0 where ROI is measured, Ms. Tobell said she "plans to see if we achieve anything better than we did without it."
Ad agency executives are also getting into integrated campaign measurement through the backdoor. Jeff Goodby, co-chairman of San Francisco shop Goodby, Silverstein & Partners, sits on the board of newly formed Harmonic Corp., San Francisco. Harmonic develops software to measure effectiveness of marketing, advertising and even packaging.
JWT spent the last 10 months developing a tool with media agency MindShare, a WPP sibling. JWT's Communications Planning Project, according to David Baker, worldwide director of Thompson Total Branding, is "a way of using a little analysis data, econometrics, sales results and the media spend to evaluate the effectiveness of overall communications plans and individual programs."
However, the tool is limited in that it requires a sufficient amount of data, time and media spend, according to Mr. Baker. So JWT is about to start testing a new tool, Communication Audit, which evaluates how individual elements of a communications program have met brand objectives. Rather than basing results on statistical models, it will evaluate human perceptions, Mr. Baker said.
"You've got to be very careful in relying on statistical analysis and consumer research that purports to give the answer to the Holy Grail [ROI]. The best studies I have seen start with common sense and human expertise," Mr. Baker said. JWT also will charge clients to use the tools.
At Grey, a set of proprietary tools also is in development. But through its Synchronized Marketing program, formerly InteGREYtion, clients have been tracking ROI on marketing programs from individual disciplines on a real-time basis since late 1998-as long as they are quantifiable.
"You can measure results by determining a cost per lead in some categories, cost per sale in other categories, and by determining the lifetime value of a customer to a brand in still other categories. So basically we have a database capability, all on the computer, that allows a client to measure the results of different disciplines in terms of generating one of these three answers," Mr. Berenson said. Clients pay a consulting fee to use the tools.
Mike Markowitz, an ad development consultant, said the latest tools likely will be very helpful for planning, but he cautions against placing too much value on them. "There never will be a piece of software that is the ultimate planning tool, that shows clients how to apportion their money and how to spend, unto itself," Mr. Markowitz said. "All of these things, at their best, are tools that need to be used in their context. If agencies pretend they are anything else, then buyer beware of black boxes."
Executives at McCann, JWT and Grey say the new tools to evaluate integrated campaigns are not meant to replace other forms of measurement already in place to track ROI for individual disciplines.
According to Michael Donahue, exec VP at the American Association of Advertising Agencies, many of the industry's measurement tools and studies-such as the AAAA's Managing Advertising Expenditures for Financial Performance study in 1998-still try to identify which half of Wanamaker's budget is waste.
The movement toward measuring ROI for individual disciplines began at least 75 years ago, when advertisers began tallying results from direct-mail campaigns. But as agencies sell their integrated capabilities, they need to show the whole works just as well as the parts. Mr. Donahue predicts that as the digital age advances, companies will continue to roll out more single-source, integrated measurement tools. "This is early-stage stuff, and nobody knows how much you can prove by using these things, but it's certainly a good idea to try," Mr. Donahue said.
- Contributing: Alice Z. Cuneo
Copyright February 2001, Crain Communications Inc.