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April 2010

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Not so fast my online advertising friend
Online Advertising - Taking a Long-term View



By Linda Young

“I can measure campaign success in real-time!” proclaimed those sites selling banner advertising. And there it was - the holy grail of marketing could be delivered to the marketer in succinct, sexy reports showing metrics like click through rate, cost per acquisition, cost per lead, and site engagement. Online advertising budgets grew at phenomenal rates, and campaign success was determined using these seemingly wonderful real-time measurements. Marketers and ad agencies alike could be heard excitedly shouting, “Shift budget to this campaign, those conversion rates are terrific!” “Move budget out of that campaign--the click through rate is awful!” “Look how much website traffic this campaign generated - Isn't that great?”

Not so fast, my online advertising friend. Somewhere caught up in all the excitement of instant gratification measurements, our rose colored glasses fell off-or at least lost a lens. It is now apparent that in our haste to embrace the digital channel and all of its new metrics, we may have discarded, or just temporarily forgotten, some key principles of direct marketing.

Let's take a minute, hop in our way-back machine and revisit a few basic principles we learned in Direct Marketing 101.

Know Thy Audience…and Deliver to Them
80% of all online advertising fails to reach its intended audience. Yes, you read that correctly. “Pray and spray “- Does that phrase sound familiar to anyone? Anyone remember when direct mail was addressed to Occupant? We've come a long way, baby. We have spent millions of dollars building marketing databases that deliver amazing customer insights, so why would we let that go to waste just because we are adding a new channel? The technology exists to bring our offline insights online, so get to it. While knowing what site a user is on or what they are reading about is good, there is plenty that information does not tell me. For example, I might love to look at yachts, but that doesn't mean I can actually afford one. I might be looking to purchase baby clothes, but that doesn't mean I have or am going to have a baby. This just confirms that advertising budgets are being “wasted” on marketing to individuals that are not our target markets. It is time for us to demand that our ads target people--not just pages.

Not All Conversions are Created Equal
Consider this: 50% of your customers add no revenue and 20% of your customers actually cost you money. That means that 30% of your customers deliver the majority of your profits. Not far off the old 80-20 rule, right? This simple statement should make it clear that not all conversions are good conversions. Should they all be treated equally in my campaign success measurements? Statistics say no. Good marketing principles predict that acquiring customers that look like my best customers are ultimately worth more, even if there are fewer of them. Therefore, I should be willing to spend more to acquire them.

Now, what if my online conversion efforts are actually skewed to those customers that cost me money? What is the impact of that? With this hypothesis in mind, we must take a longer term view of our conversions. In order to understand which campaigns are really successful, we must carefully track the long-term impact of the campaigns that source our online conversions. To make an old school analogy - an offline campaign that had a response rate of 5% might seem successful but would not have been repeated if the acquisitions were all concentrated in low value customer segments. Shouldn't that be the same for your online campaigns?

Relevant Messaging Matters
It's the same old story - my neighbor next door, my neighbor across the street, and I don't look anything alike. Yes, we all may use Tylenol but the product features we care about are very, very different.

My neighbor next door has two children under five years of age. Hmmm…an ad featuring children's Tylenol might be appropriate, right? My retired neighbors across the street are likely to care about the easy-to-open packaging that is now available. As for my family, there are no little children with fevers and we can still open child proof caps. But middle age is creeping in (okay, crept in!) when we weren't looking, and some aches and pains are all to frequent for both my spouse and me. Are these things important for a marketer to know about our household? Of course!

So then, how do we get it right when targeting online?

Direct mail has been successful in using this type of individual and household level information to deliver relevant messaging. But as marketing budgets continue to shift, why hasn't there been the same outcry for targeted messages in the digital channels? Lack of insights? Lack of information? This same level of information actually is available online if you know where to look. So why have we accepted the same creative, the same offer, and the same message being shown to very different online audiences? Whatever the answer, it is time to take action. Dynamic messaging for our online advertising can improve conversion rates anywhere from 20-100%. Now that we know thy audience, let's appropriately message thy audience.

Forgetting your roots
So why are so many experienced marketers not applying these fundamental principles of marketing for their online campaigns? Many bought into the instant performance metrics hype-but equally to blame is economics. The shear economics of digital advertising, and even more specifically banner ads, has allowed us to be less sensitive to spending. In direct mail, touching a single consumer just once might cost $1, $1.50 or more. Online, I can show 100-300 ads for that same $1.

The economic crisis did cause us to focus on our online budgets, but what we really focused on was maximizing the new online metrics; not necessarily employing broader and better direct marketing measurements. Instead of requiring my online advertising to achieve a cost per conversion of $25, I changed it to $30. That push, however, didn't change the fact that 80% of all online advertising still did not reach my best, most qualified audience - those users that could, should, and ultimately would buy my product or engage with my brand. If online advertising is a $9 billion business then over $7 billion are wasted each year. Imagine what you could do with just your small portion of that? My mind runs wild just thinking about it...

What is Old is New Again
It's time for enlightenment-instant gratification derived from shallow online performance metrics can be detrimental to the business. Accurate measurements of a campaign's success require the application of key marketing principles and a clear definition of how to track results through online and offline channels over time. Not that we should abandon the use of the tasty and, initially satisfying, campaign performance snacks, but we have to stop treating acquisition metrics like CPM, CPA, GRP, and CTR like they are a full on meal. Doing this creates “leaky buckets,” “zombies,” and the “quiet types” who drain our resources and ultimately leave us hungry for revenue.

We have to ensure our online metrics begin to incorporate “acquired value” metrics such as the likely longevity of relationship, upsell/cross-sell potential, influence, and likely service costs. Maybe we should even be so bold as to measure customer value per ad dollar. It is time we demand that our online advertising is delivered to the right audience using the right message, all the time, every time.

Implementing this intelligence and principles requires a partner that understands the value of your customers-one that has been old school and new school and can take a holistic view of your business. Acxiom has been providing direct marketing techniques and insight data for over 40 years, and now we are taking those learnings to the digital world - all 3 screens. Acxiom can provide the needed technology to follow the old marketing rules and consult with you on the best customers and prospects to target. Contact us today for a demonstration of our multi-channel, multi-targeting capabilities at the household and individual level. For more information about Acxiom go online to www.acxiom.com.

LINDA YOUNG has been with Acxiom for 20 years applying sound direct marketing principles in both the old school and the new school. Linda currently leads the Relevance-X display products at Acxiom focused on audience targeted advertising and has been working with key advertisers, agencies, and partners in the online ecosystem for over 4 years.

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