There is no sugarcoating it. If you’re still measuring success by year-on-year metrics, it’s not going to be a comfortable 2022. Kieran Reed from Alpha Digital explores.
Performance marketing results will ultimately take a hit, with Cost Per Clicks (CPCs) well and truly on the rise, consumer confidence dropping rapidly (down 10 points since April alone) and discretionary spending on a sharp decline as well.
We’ve had two years where performance channels have given great results. Lockdowns forced people online and we saw amazing return on ad spend (ROAS) and revenue growth year-on-year. Consumer confidence was high, so investing more and optimising campaigns was a simple road to success. Growth had become an expectation.
But what happens now, when the effectiveness of the channels and metrics we once relied on are being called into question? “If we just optimise our performance campaign more, we’ll get a result” is a dangerous mindset. The underlying assumption is no longer a solid foundation, as performance weakens as a channel. No amount of hyper-targeting, media spend or optimisation is going to change the ability of these channels to generate revenue and business value is normalising.
Typically we’ve relied on ROAS and revenue to measure performance. However, these benchmarks will no longer illustrate value given current market conditions.
So, how can we improve our understanding of performance? Well, Marketing Mix Modelling is a good starting point. Its premise is to review all of your marketing spend. This will help to understand where you’re investing all through the funnel. Then, see where changes in budget allocation could elicit the best results. It can give marketers better levers to play with than traditional measurement may have offered.
When you can see how these elements work together in your current marketing mix, you can make changes to the play. These will improve results. This could be pulling back on Below the Line activation media spend. It could be adding to Above the Line branding efforts to build branded demand.
New technology which can enhance our knowledge of the marketing mix has acted as a catalyst for this switch in approach to marketing. Previously you may have been looking solely at expenditure and inbound revenue. But for this to work best you need a better and more holistic attribution model. While our previous default was non-direct last-click attribution in Google Analytics, now the marketing team and agencies should be becoming familiar with the improved and upgraded data-driven attribution available with GA4.
A word of caution, comparing the two with each other is like comparing apples with oranges. While Universal Analytics was session-based, GA4 works on a new Event-based model and therefore will report similar, but different data back to you. In addition, this new toolset allows for a greater omnichannel focus, with marketers easily able to import different data sources, such as in-store purchase data, to stay better informed across all touchpoints.
New success metrics
ROMI and MER are the two real indicators that marketers should be using, and it’s time to say goodbye to ROAS.
Return On Marketing Investment is a fresh and more robust approach to looking at campaign spend and its performance. ROMI asks us to consider return, less costs, as a percentage of cost. This percentage metric, is less gamable and better indicates how much you’ve been able to achieve from your entire campaign expenditure rather than only media budget with ROAS.
Marketing Efficiency Ratio is the total revenue divided by your total paid spend from all channels.
Essentially it’s ROAS but we include all of the media spend, across all channels together. Then, evaluate against the total revenue rather than splitting it channel by channel. The premise being that each of these channels work together to deliver a total result, in combination, priming the consumer. By narrowing your focus to a single channel at a time, you are left with an unrealistic linear customer journey.
The biggest takeaway here is that a marketer needs to be able to zoom out to see the bigger picture. It’s better to focus on channel diversity and performance of a campaign, than “which keyword” or which ad copy generated the best ROAS.
Simply looking at directly attributed revenue, doesn’t paint the full picture.
Trust and transparency are key here. Within departments and also within the client-agency model. You need to be able to understand and appreciate all the involved costs and be realistic with targets in this new model giving time to gather a good sample size of data before you make any changes. Any lack of trust and communication will throw out the model’s effectiveness.
Switching to a holistic mindset
Digital Paid media has at times in the past three years felt like an ATM. That is, positive return was expected. When it stops working, you just need to unpack the overall process to fix it. The environment is changing rapidly, and unless your business is in a crisis, you should be looking at the full picture and support a full funnel approach. You can’t optimise your business out of a recession.
Traditionally we’ve evaluated our media spend, from month-to-month and year-on-year. Understanding your marketing mix and the relationship between the channels will offer metrics that will give you the chance to best succeed, no matter the current market.
The loss of agency when it comes to hyper targeting, thanks to privacy changes around consumer data, doesn’t need to be a backbreaking change for your digital marketing. It’s always had its flaws. This fresh perspective allows the ability to connect different sources together and to see how your marketing channels work together to bring your brand/business to life.
Kieran Reed is the senior digital manager at Alpha Digital.