A way to solve advertising ROI

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You guys love to come and show me how to spend money. For once, I'd like you to show me how to make some money."

That is a quote from an ex-client, when I was an ad agency account guy. It's a moment I'll never forget because I knew his comment brought an important (and until then unspoken) issue out in the open. Clients wish their agencies would play by the same rules they do. Sales. Profitability. Return on investment. Impact on shareholder value.

I also know the stock responses to this challenge. I've recited them 100 times myself. Advertising is influenced by a number of factors an agency can't control. No one has validated a direct correlation between advertising, sales and profit. There are "soft" measures that are as important to a client's business as sales or profitability-like brand attitude and awareness, recall scores and purchase intent measures.

Most advertising agencies prefer to avoid conversations about the performance of their programs. They feel it's a no-win discussion. But the use of stock answers to avoid the discussion is dangerous. Either agencies are going to agree to be measured and compensated by performance metrics like ROI, or they risk losing business to competitors that do.

One of the front-line stock answers is the supposed lack of data required to link communications programs with real-life consumer behavior and product-service consumption. For the past couple of decades, we've been anticipating a reliable single-source data service to provide that linkage. Recently, some Internet research folks reported their single source solution is just around the corner. Based on assurances we've heard before, such claims are questionable.

It really doesn't matter, though, because we don't have to wait for the arrival of a single-source supplier. The data we need to measure marketing and advertising effectiveness are already available, but most agencies don't seem to know how or where to look. In our experience, the data are located in a host of "disconnected" places in addition to the usual syndicated reporting services. They reside in records of manufacturer shipments, retail sell-through and inventory, retail advertising (especially ROP), circulars, direct mail, point-of-sale merchandising and assortment plan-o-grams.

However, all that data must be loaded into a relational database before they can become useful. That is no mean feat. It also requires working with supposedly uncooperative departments like MIS and sales, and with supposed adversaries, such as brokers, distributors and retailers-not to mention sales promotion and merchandising agencies. But we know from experience and hard work that it can be done.

The key lies in motivating client and agency teams to "think like a brand and act like a retailer" in the common pursuit of knowing what's working where and why.

Once the data are funneled into a common database, a number of statistical methods, collectively known as Effective Marketing Performance (EMP), can determine the critical success factors of a client's business. EMP systematically integrates retailer, manufacturer and market data to measure sell-through related to specific marketing programs, and then analyze their ROI. Similar to the way in which the disciplines of Efficient Consumer Response (ECR) were intended to produce bottom-line cost efficiencies, EMP is aimed at generating top-line, marketing effectiveness.

EMP methodologies can be used to capture advertising up-lift and promotional program performance, match marketing support momentum to product life cycles and manage retail inventory and productivity by SKU, by outlet, by week.

By moving from a subjective to a performance-based process, everyone benefits. Advertisers can't buy time by blaming and firing their agencies. Agencies can stop feeling victimized by drops in sales and new client personnel-or by being locked into a zero-sum revenue game with the other marketing service companies who work with their client.

Programs that are working get supported. The ones that aren't don't. So, what's holding us back? Either agencies are going to agree to be measured and compensated by performance metrics like ROI, or they risk losing business to competitors that do.

The stock answers really aren't true. Waiting for the Holy Grail of single source data isn't necessary. All the data we need to become performance-based partners with clients are here today-if we take the time to retrieve and analyze properly.

Chris Grindem is senior partner, Integrated Marketing Solutions, Bloomfield Hills, Mich., ([email protected]), a consulting firm that specializes in measuring and improving the effectiveness of marketing programs in retail stores.

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