The common question directed at marketing is "is it working?". But current measurement approaches fail to show how marketing activity delivers business value, so it is seen as a cost, not an investment.
Watch this video recorded at eTail EU Flagship in May 2021. Elliott Clayton, SVP Media at Epsilon and his partner Andy Foote, Performance & Analytics Practice at Zebra, hosted a keynote and demonstrated how eCommerce and Marketing leaders can drive meaningful business outcomes without increasing spend.
Why it matters?
While marketers believe it's their activities that cause a sale, often it's the process a buyer goes through: the sale generates the media, the media does not generate the sale.
Yet all the touchpoints a buyer interacts with – be it search, display, social, etc. – claim credit for the final sale. As many companies use last-touch attribution to measure marketing effectiveness, the entire credit for a sale goes to the last touchpoint. But this leads to a misalignment of marketing budget, to the benefit of a few channels and platforms.
Research shows that people spend 34% of their time online in the walled gardens such as Facebook and Google. However, 60% of advertising spend goes to these big platforms. This disconnect shows that how marketing is currently measured is broken, and a new way is needed to demonstrate the value marketing delivers.
Deeper dive: three approaches to increasing marketing returns
By better measuring value, marketers can drive value. Three ways to do this are to:
- Measure real value - not vanity metrics. Measure bottom-line contribution, not revenue. There is a significant revenue dilution from top to bottom-line, so focus on net revenue. Fashion retailers, for example, can incorporate margins and return rates – which both impact the bottom-line - into their bidding algorithms. Do this and they improve marketing's contribution.
- Put customers first. Don't fixate on what's happening at a channel level: fixate on the outcomes you're driving for customers – this is much more valuable.
- Obsess over incrementality. It's not return on investment (ROI) that's important – it's incremental ROI. Focus on identifying which of your sales happened due to your marketing activity and ignore those that would have naturally occurred – measure incrementality.
Steps to incremental measurement success
To establish incremental measurement and prove the value marketing is delivering, first, you must adopt incrementality testing. For a robust test, you need to ensure:
- You have a clean test and control. You must know who is in the test group and who is in the control so you can measure the impact and lift.
- You do it continually. Building your future budget allocation around a one-off incrementality test on a small budget in a single channel has no value. As many factors influence sales, for example, seasonality, testing requires a long-term commitment to gain real insight.
- You can replicate the test. Any test must be able to be repeated with the same results. You can then confidently assign the lift to your marketing, and other parties can independently validate your findings.
By measuring incremental business outcomes, marketing can optimise their activity to these outcomes, allowing them to demonstrate their real value.
Proof point: Using incremental testing around delivering messages earlier in a user's buyer journey, Domino's Pizza achieved an incremental return of 10:1 on its ad spend.
The bottom line
Marketing's current measurement approach distorts its understanding of channel value and prevents it from proving the business outcomes it delivers. By ditching the old models and embracing incremental measurement, marketers can elevate their standing in the business, gain recognition for the value they create and shift perceptions of marketing from being a cost to being an investment.