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A Marketing History Lesson: Our Success Metrics Evolve

Volume 1, Issue 1 - February, 2011

Bill Muller, Editor

Welcome to the inaugural issue of The IQ Advisor – a monthly newsletter providing actionable insights on how to use cross channel marketing intelligence, strategies and tactics to improve the ROI of your overall marketing ecosystem. Before diving into the advice and recommendations, allow me to recount a brief lesson in marketing history…

Before the Internet, there were brick and mortar stores. And so by inference, before there was “the click,” there was “in-store revenue.” Back then, marketers utilized demand-generation channels like TV, radio, print, and outdoor – and the success metrics for those channels were ”in-store revenues.” If marketers ran a TV ad and in-store revenues went up 7%, then the TV ad “must” have produced that increase, and the ROI of the TV ad was easy to calculate. But as we can all look back now and clearly see, that measurement methodology could be extremely inaccurate – because, among other reasons, marketers had no way of knowing if every incremental purchase was actually made by someone who was influenced by the advertisement.

History Repeats Itself

Then, with the advent of the Internet and ecommerce, a direct correlation between online clicks – and the revenue produced by those clicks – was enabled. All of a sudden marketers “knew” that 100% of the revenue produced through clicks on search engine results was a direct result the marketer’s investment in that search engine, and the ROI of that channel was also easy to calculate. But as many marketers now clearly realize, this measurement methodology can also be extremely inaccurate – as marketers have had no way of knowing which other factors/touches/influences that took place along the way contributed to that eventual purchase.

Enter attribution management– the science of calculating the contribution that each marketing touchpoint experienced by a consumer has on generating a “conversion action” – such as a purchase. Once the true attribution of each touchpoint is calculated, more intelligent decisions can be made by marketers about investments in the specific channels, campaigns and their attributes that produce the best return on investment. With attribution management, a direct correlation between all the factors that contributed to a purchase – and the revenue produced by that purchase – has been enabled. So “attribution” is to “the click” as “the click” was to “in-store revenues.” And as a result, “last click measurement” is just as antiquated and inaccurate in today’s marketing environment as in-store revenue measurement once was.

From Art to Science

In order for the true credit for conversions to be attributed across marketing touchpoints, sound “science” must be applied. And today, marketing – once thought an “art” – is increasingly a “science.” It is a rare company today that participates in only one marketing channel, and as soon as there’s more than one channel being used, influence is exerted between those channels. Today’s “marketing science” seeks to quantify that influence so that the appropriate monetary credit is given to all the factors that exerted influence over a purchase. Those companies who fail to quantify that influence will quickly be at a competitive disadvantage to those who do. And while some organizations will get more and more efficient in their marketing spending, others will be basing their strategies and tactics on inaccurate and misleading “intelligence” that will produce increasingly inefficient marketing.

Marketing “Scientists”

At some organizations the additional science required to produce effective marketing has already meant the hiring of PhDs in mathematics that analyze data and help inform the strategies and tactics adopted by their marketing colleagues. At other companies it has meant contracting with firms who specialize in this “marketing science” and have experience meeting the marketing intelligence needs of a broad variety of companies with a broad variety of business models. In either case, literacy in the utilization of data and of mathematics is now an absolutely essential skill set within today’s marketing organization.

As companies get smarter about the influence that channels have on each other – and the “halo-effect” between their channels is quantified – marketers will get increasingly strategic about how they integrate and how they invest in their marketing mix. It’s going to be a fun process to watch.

We look forward to delivering monthly marketing insights to your email inbox. Feel free to pass this issue along to your friends or colleagues.

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