Advertising has value only to the degree that it influences consumer behavior. But whether advertising succeeds in driving people to purchase products and how well it is able to do so are among the most important and difficult-to-answer questions faced by marketers, media companies, and agencies. Indeed, the measurement of advertising effectiveness has long been a frustrating and imperfect science, leaving marketers with few options but to toss out messages in various directions and hope that some indication of consumer response would appear.
As unsophisticated and unreliable as traditional media measurement approaches may have been in the past, they did provide standards and currencies that enabled marketers, buying agencies, and media companies to transact business. Today, however, this equilibrium has become unstable. Marketers demand more effectiveness and efficiency from their media buys. Digital media are reaching critical mass with consumers. And the promise of more granular (or even real-time) data capture of consumer response to advertising is tantalizingly close to realization.
“Lately, marketers have become less interested in the number of eyeballs that see a screen or hands that touch a page and more interested in the behavior of the owners of those hands and eyes, and how the ad message connects with them,” says David Verklin, CEO of Carat Americas and chairman of Carat Asia-Pacific, the world’s largest independent media buying agency.
Or, put another way, the proliferation of media (from yesterday’s print, radio, and TV to today’s Web, cell phones, podcasts, GPS systems, video games, PDAs, and more) and the fragmentation of audiences have rendered the traditional currency of advertising — audience exposure, or “reach” — a much less compelling measure of media value than it was before. In turn, the very prospect of new metrics has contributed greatly to the popularity of digital media among advertisers. In a recent Booz Allen Hamilton survey conducted with the Association of National Advertisers, 62 percent of marketers surveyed said that they would spend more on digital media if better cross-platform metrics existed to gauge advertising effectiveness.
Marketers can use digital media to deliver contextually relevant messages and product information to specific concentrations of potential customers, targeting only consumers looking for a new Volvo, planning a ski trip to Deer Valley, or searching for organic baby food. And they can measure the actual results of those efforts instead of relying on extrapolated audience estimates. Moreover, consumer actions, including browsing, clicking on an ad, sharing information with a friend, and buying a product, as well as the development of brand loyalty, can be recorded and analyzed, allowing marketers to track with greater precision how a specific piece of advertising influences consumers to make brand and purchase decisions.
With these possibilities, it’s little wonder that marketers have so rapidly embraced Google’s pay-for-performance advertising model, in which advertisers pay Google only when potential customers actually click through to their Web sites. No longer do marketers just ask, What is the cost of the gross rating points that we are buying? Now, they want to know results at a much more detailed level, asking, Who is searching for my brand or product and how often? What sites are my target consumers going to, and what do they do there? How many online registrations are my advertisements generating? And, most importantly, how does all this activity correlate to actual sales?
But the media metrics for the new digital media environment are still of uneven quality. They lack the standardization that would enable the simple comparison of advertising effectiveness both within the online environment and across other media channels. Marketers, agencies, and media companies all agree that improvements in these metrics are going to be essential; without them, it will be difficult to profit in an advertising market increasingly characterized by more choices among more media. In other words, there will need to be a wholesale shift to metrics that are both outcome based and comparable across many channels.
The movement toward outcome-based metrics is not an entirely new phenomenon. For two decades, there has been a slow and steady transfer of marketing budgets from metrics-deprived mainstream media, such as broadcast TV, radio, magazines, and newspapers (known in marketing as “above-the-line” media) to direct marketing and promotions (“below-the-line” media), for which it has been possible to track results with greater accuracy. Until recently, many observers dismissed the growth in below-the-line spending as a trend driven largely by retailers, who, they said, were using trade promotions to gain a greater share of the huge marketing budgets of major consumer packaged goods companies. That has been true to some extent, but the spending shift from above-the-line to below-the-line advertising is better explained by the fact that marketers can more easily measure and prove the value of below-the-line spending.
The new form of outcome-based metrics combines the experience from below-the-line media with technological innovations in measurement, especially involving television. Not all media can, or ever will, match the direct-response metrics of Google. But the broad evolution of these new, more granular, more precise metrics will drive profound changes in the practice and culture of marketing and brand advertising in all media.
New technologies will support a shift in audience measurement from estimates to data that is closer to (and in some cases is) actual census data — in other words, to real rather than projected results. For example, Nielsen Media Research, the reigning master of television viewing measures, has traditionally captured home television viewing data from 12,000 households (a tiny sliver of the estimated 112 million U.S. households with televisions) and then used that sample to project ratings for the whole country. Instead, in the not-too-distant future, set-top boxes and other devices built into digital television systems will provide data on every consumer viewing choice related to both programming and commercials. Marketers will ultimately have access to media and advertising response information that will be similar in granularity and comprehensiveness to the data captured today at the retail point of sale.
Today, Nielsen is investing heavily in an ambitious “Anytime Anywhere Media Measurement” cross-platform initiative designed to increase the scale and accuracy of its consumer sample. This initiative will move more deeply into online, outdoor, and in-store media, and strengthen the quality of its TV-derived data. At the same time, players such as IAG Research and TNS Media Intelligence are launching innovative alternatives. Before long, data will be gathered from mobile meters that track out-of-home television viewing — from Internet video downloads and streams and from videos viewed on PDAs cell phones, MP3 players, and other portable devices.
In this increasingly dynamic environment, new outcome-focused metrics will shift the focal point of all advertising measurement from exposure to results. These metrics will include:
Commercial Ratings: Viewership of advertisements rather than programming, consumer retention of commercial messages, the impact of positions in pods (sequences of commercials that air during a single programming break), and the overall design of pods.
Session Quality and Engagement: The ads recalled per session or visit, time spent per session or visit, average sessions per user, and strength of brand recall.
Total Viewing Behavior: The number of consumers and their total time spent accessing media brands via both offline and online platforms (a metric that is especially relevant for traditional media companies trying to increase their digital presence and for marketers who want to compare digital to traditional consumer behavior).
Opt-in Activity: Online registrations, open rates, toll-free calls, and online and offline requests for more information.
Consumer Participation: Indicators of viral activity, such as pass-along and referral rates; levels of interaction with branded content, such as uploads of brand content to personal sites; and length of branded interaction.
Sales Impact: Leads generated, store traffic, and volume lift at retail stores.
Many marketers are anxious to use metrics like these to crack the code of multiplatform advertising and marketing return on investment (ROI). In fact, nearly 70 percent of marketers in the recent Booz Allen survey identified improved ROI analytics — along with the consumer insights they deliver — as the most desired of all advertising capabilities. Their wish, it appears, is about to be granted.
Christopher Vollmer ([email protected]) is a vice president with Booz Allen Hamilton based in New York. He leads the firm’s work in North American media and entertainment and focuses on strategy development, consumer marketing, and advertising sales in media, entertainment, and consumer products.
This article is adapted from Vollmer’s new book, Always On: Advertising, Marketing and Media in an Era of Consumer Control (McGraw-Hill, 2008).