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.
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
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:
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:
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.
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Featured image attribution: Christin Hume on Unsplash