Everything is measurable today. In fact, marketing departments are so overwhelmed with campaign performance data that they've begun hiring people specifically dedicated to gathering, analyzing, and interpreting this information. With all this data at their fingertips, brands should be able to utilize their distribution channels in marketing efforts to the fullest, as well as make better-educated decisions around ad spend and optimization—right?
In theory, yes, but not without an understanding of ad efficiency.
As senior stakeholders place even more pressure on marketing leaders to continually optimize digital ad ROI, we're delving into what impacts returns and a few factors you'll need to consider when deciding which channels to use. Since, after all, it doesn't really matter how much money you save if your efforts fail to drive the results your organization needs to reach its goals.
What Is Ad Efficiency?
Ad efficiency is the ratio of ad spend to the size of the audience your ad reached. For example, if you spent $1,000 on a campaign and reached 5,000 people within your target audience, your ad efficiency is $1,000 to 5,000 (or $0.20 per person).
Many marketers use ad efficiency as an indicator of whether or not they're getting the best bang for their buck. If your ads aren't as efficient as expected, it's time to optimize your campaign or dial back your spend.
Also, because ad efficiency varies substantially by industry, target audience, campaign objective, and other variables, it's a good idea to set your own baseline. By reviewing your historical data for brand awareness campaigns, you might discover you have an average efficiency ratio of $100 to 1,000. Moving forward, you'll know that any time the ratio of a brand awareness campaign drops below that average, it's time to evaluate your campaign and its spend—or you may risk a poor ROI.
Image attribution: YouXVentures on Unsplash
What Impacts Digital Ad ROI?
So, which distribution channels in marketing offer the best ROI? Unfortunately, there's no straightforward answer, as the results can vary widely based on the specifics of each campaign. However, we can safely say that if measurable ROI is your goal, you're better off going a digital-only route.
"Why does social media outrank billboard or bus shelter advertising in terms of importance for CMOs?" asks marketing communications manager Nadine Burzler in an article for Smart Insights. "A wild guess is that the one is more measurable than the other, and therefore, much better for calculating ROI."
As you might expect, ROI varies quite a bit depending on several factors, including:
- Industry: A B2B technology brand might discover they earn better returns through search ads, while a consumer-facing brand might earn higher ROI through social media campaigns.
- Targeting criteria: How little or how much you target can affect your ROI. While casting a wide net might earn a higher reach, more specific targeting may be more effective. But getting too granular may limit your reach too much and hurt your chances of engaging with target audiences.
- Platform: Just as all channels are not created equal in terms of ROI, neither are all platforms. A brand may find they earn significant returns from LinkedIn ads, but few on Facebook—or vice versa.
- Season: If your industry (or your customers' industry) is affected by seasonal ebbs and flows, you might find your ROI varies from one part of the year to the next.
- Budget: Managing digital ad budgets is challenging and requires constant tweaking. Spend too little and you may not achieve enough reach to earn a healthy ROI, but if you set your spend too high, you risk blowing through your budget too early. It's a balancing act that requires constant monitoring and optimization.
- Creative: If your copy or visuals fail to resonate with your audience, it can threaten a campaign's ROI.
3 Questions to Consider When Choosing Distribution Channels in Marketing
In most cases, it's not about determining which channel works best, but rather, which mix of channels yields the greatest returns. Here are a few questions you should ask to hone in on what that mix should look like:
- Where does my audience spend their time? Consider your target audience's online behaviors. Is there a particular platform where they spend more time than another? If so, it probably makes more sense to heavy-up your budget for that channel. Of course, a cohesive multichannel experience can be even more powerful.
- What's the best method for delivering this message? In some instances, the message you want to convey may be more compelling in one format than another. If you're looking to elicit an emotional response, you'd probably want to leverage video advertising. But if you need to get a message out immediately and don't have the time or resources to produce a video ad, a text search ad might be a better choice.
- What are you trying to accomplish with your campaign? Your objective can help you determine the best distribution channels for marketing. For example, if you want to let existing customers know about a new product or product feature, email marketing can feel more personal and direct. If you're hoping to reach a new audience, social media ads may be more effective.
Achieving a healthy digital ad ROI isn't always as simple or easy as top executives may think (or hope). It requires plenty of testing, tweaking, and optimizing. And while you may have plenty of data to help guide your decisions, it still takes time and a little trial and error to identify the right distribution channels for your brand.
By recognizing what affects ROI and evaluating your audience, message, and objectives, you'll be more likely to achieve the best possible returns and meet your goals.
For more stories like this, subscribe to the Content Standard newsletter.
Featured image attribution: Christin Hume on Unsplash