Digital advertising was supposed to solve so many problems. If your clients are confused about their digital ad ROI, they might not be looking at the right ad-related data. Marketers have been led to believe they’ll know what their ad spending yielded and who they reached. Instead, marketers are learning that Facebook employees believe the social media giant overestimated the impact of advertising on its site. And then there’s Sinan Aral’s analysis on digital advertising in general and the “fundamental confusion between correlation and causation.” And how much can a marketer expect to sell to a customer, anyway? The CMO Council's new survey shows where marketers are in their quest to measure the lifetime value of a customer. If your clients want more granular information about their digital ad ROI, we’ve located some research to answer them.
Is Lift the Same as Conversion Rate?
“The key to making advertising pay is getting people to buy your goods (or donate to a political campaign or take a vaccine) who would not otherwise have done so,” claims Sinan Aral. Your clients’ ad should change consumer behavior. When that happens, they can measure “lift.”
During an online ad campaign, your clients can measure the increase in sales that happened between two points in time. They may select the week before the campaign ran as a beginning point and then two days after the last ad ran as the end point. Marketers will certainly tout the increase in sales, perhaps 5%, as “lift” driven by the ad campaign.
But they also focus on ad views and ad clicks. This focus tells them little about who is seeing their ads and how frequently people are seeing them. All too often, the ads are seen by someone who’s already buying the product. Measuring conversion rates on this type of campaign would be falsely high because some of the people who made purchases are existing customers.
Selling to New Customers
If your clients want to expand their customer base, which is one common way to grow a business, they should shift their ad focus to reach consumers who aren’t yet buying their product. Aral cites data from Proctor & Gamble’s well publicized cut to its digital ad budget. They made that big decision after the company’s data specialists reported on ad budget waste. Specifically, existing customers saw “social media ads ten to twenty times a month.”
In studying first-time buyers, P&G built an ideal customer profile for a couple of new audiences. Their changes made sense. The company was initially trying to reach women who were ages 18 to 49. Many of those women were already customers and wouldn’t buy any more product beyond what they already used, no matter how much advertising they saw. When the company changed their ad strategy to focus on reaching new moms, they expanded revenue more cost effectively.
Lifetime Value of Existing Customers
CMO Council and Deloitte Digital analysts point out that marketers can optimize their outcomes when they understand who is likely to buy how much of a product over time. Customer lifetime value (LTV) can be a powerful metric, but only 47% of marketers are attempting to track this information. That's understandable as it’s not easy to calculate this number. Marketers need an algorithm that incorporates “customer segmentation, psychographics, discount rates, cost of acquisition (CAC), retention costs, churn rates, revenue per user” and more.
So far, 84% of businesses are failing to segment and target different customer groups in this way. Your clients can start by having their sales and customer service reps enter unique information into the CRM. In general, businesses believe they can mine email (73%) and social media (54%) to learn about a customer’s purchase intent. This data-heavy process will burden smaller businesses and you may be able to market your services to them.
Once this information is available, marketers will be able to customize marketing campaigns to targeted customer groups. For example, a Deloitte Digital study finds that brand loyalists can help your client sell more. These loyalists will buy their product over several years and they’ll talk it up on social media at the same time.
Looking at the Right Ad-Related Data
The approach your clients use to market to brand loyalists will be vastly different than what they use to attract new customers. When marketers ask if they are looking at the right ad-related data, the answer will often be about the purchase intent of the audience they are trying to reach and the LTV. You can help them start on the process of building their databases by checking out the AudienceSCAN profiles available on AdMall from SalesFuel.