Should you be investing in marketing measurement?

With UK marketing spend trending above £120bn (the figure for 2021 according to Marketing Week), the question is: should you be investing in marketing measurement? The answer for most marketers is ‘probably’, and for anyone spending serious amounts of marketing money, then it’s a resounding ‘yes’.

But what is often not discussed is just how much you should budget for the measurement part, and exactly what you should expect to get back from it.

Magic formula

When looking at what you should be measuring, we found the formula below on the Harvard Business Review website. Although it is undoubtably correct, it also highlights the measurement challenge faced by most businesses who invest substantial amounts in marketing. Very few companies get near to measuring accurately ‘the incremental financial value gained as a result of marketing investment’.

marketing investment formula diagram

So, let’s be bold and suggest some numbers for what you could spend on marketing measurement, assuming that you want to move beyond Google’s G4 and get something that is transparent and closer to ‘incremental financial value’.

Channel complexity

A big driver of cost is the number and complexity of channels you use and the campaigns you send out. At the simple end of the spectrum are organisations purely using digital, with no call centre and all sales processed by an ecommerce system. Such ecosystems are relatively straightforward to evaluate.

At the complex end are organisations using multiple indirect channels, such as TV combined with direct, and within direct, deploying both offline and online.

To measure just your direct channels, you can almost get away with only using customer journey-based attribution or MTA1, although you will always be at risk of over claiming because you are ignoring both the baseline sales that would happen without any marketing, and the incremental effects on the brand of your marketing.

But when you are using indirect channels, with or without direct, you will need to use an approach like econometrics or MMM2 to understand both the short and the longer-term effects of your marketing.

We find that there are great benefits in terms of granularity and accuracy to be obtained from using both MTA and MMM together. The findings from the MMM provide an umbrella view, and within that the MTA gets into the detail of how effective each direct campaign really is.

Marketing attribution

From our own research into typical industry charges for marketing attribution, both simple and complex, and for different levels of budget, we have compiled the following table. This should only be regarded as a very rough and ready guide, but we felt that some indication of likely costs was more helpful than none.

In this table the percentages relate to the overall marketing spend budget across all channels:

marketing budget table

Given the likely level of improved marketing ROI once accurate measurements are in place, these levels of investment should provide a very healthy ROI in themselves. However, for that to be realised a number of conditions need to be met:

  • There needs to be cross functional support from the outset for the new measurement process being introduced, even though it may show different results from those currently being reported
  • The measurement should be transparent in terms of how it is calculated, and independent in terms of who does it. Media owners such as Google or agencies wishing to protect spending budgets cannot be relied on to do this.
  • The results need to be acted on, particularly across the budgeting process, as it is likely that spend will need to be moved from where it is now.
  • It must be accepted that however much care is taken in the marketing measurement it is not an exact science, and particularly so when extrapolating from how spend is distributed now to how it might be in the future.

However, for anyone with a substantial marketing budget, the benefits from going down the route of marketing measurement should far outweigh the costs.

 

Footnotes on MTA and MMM

1. Customer journey-based attribution or MTA works by evaluating the contribution of each individual step leading up to a sale, such as clicking through from an email or receiving a catalogue, and then attributing the value of the sale across the steps that led up to it. The value of a campaign is then derived from the value of each of the journey steps it created that preceded a sale.

2. Econometrics or MMM is a time-series based modelling approach that looks at all the possible influences impacting the volume of sales, and includes both marketing activities like TV or press, with external factors like seasonality, economic confidence, weather etc. It is good at estimating both the short-term effects of marketing and the longer term brand impacts.

UniFida logo

UniFida is the trading name of Marketing Planning Services Ltd, a London based technology and data science company set up in 2014. Our overall aim is to help organisations build more customer value at less marketing cost.

Our technology focus has been to develop UniFida. Data science business comes both from existing users of UniFida, and from clients looking to us to solve their more complex data related marketing questions.

Marketing is changing at an explosive speed. Our ambition is to help our clients stay empowered and ahead in this challenging environment.

Delivering successful marketing attribution projects

You might think that introducing accurate omni-channel marketing attribution is a sensible thing to do and that there would be a limited chance of failure. But think again, as these projects can and do fail.

The reasons are mainly to do with what they are replacing. Prior to the start of such a project there was probably no one person with overall responsibility for marketing attribution, or even someone with it in their job description. Instead, there are likely to have been many local attribution activities, each one designed to prove to the business that team X or Y, or channel Z, was doing a good job. The most typical team silos are digital and direct marketing, yet these teams have the most to benefit from working together on attribution.

Attribution projects

It is common to find attribution projects limited by media channel, such as including selected digital channels with no account for direct channels, or limited by sales channel, such as just including online sales with no account for call centre or store sales – or both. The attribution work may have been done internally, but more often externally by an advertising agency. And the external agency may be driven by a need to keep funds flowing through their channel, rather than necessarily being focussed on the end contribution of their activities.

Some marketing attribution looks at more superficial measures such as opens and clicks, rather than at the longer-term value generated by a campaign. Again, they often ignore the fact that orders are usually achieved through a combination of customer interactions in more than one channel.

So, a new omni-channel marketing attribution project, centrally and professionally managed, is definitely going to be disruptive for certain vested interests.

Avoiding disruption

To avoid internal alienation and disruption, it is essential that the entire company management team, from finance to marketing, buys into the project from the start and has confidence in the methodology that is being used. They also need agree that they will respect the results produced, even when they may upgrade or downgrade the value contributed by certain existing activities.

However, as one US commentator recently put it, ‘algos make a unified approach possible’. The ‘algos’ (or algorithms) are what make omni-channel marketing attribution possible, and if they are well designed, they will deliver trustworthy attribution results that can be used to guide marketing spend, and optimise budget allocation in the future.

If the business is aware from the start of the consequences – as well as the immense benefits – of introducing accurate omni-channel marketing attribution, then the project can succeed, and the business can optimise the marketing budget and reap the sales and growth rewards.

UniFida logo

UniFida is the trading name of Marketing Planning Services Ltd, a London based technology and data science company set up in 2014. Our overall aim is to help organisations build more customer value at less marketing cost.

Our technology focus has been to develop UniFida. Data science business comes both from existing users of UniFida, and from clients looking to us to solve their more complex data related marketing questions.

Marketing is changing at an explosive speed. Our ambition is to help our clients stay empowered and ahead in this challenging environment.

Why marketeers must not lose sight of value-based marketing

Among the objectives marketers often set themselves, ROMI (return on marketing investment) is normally near the top. The problem is that, although it is comparatively easy to measure the overall investment, it is much harder to measure the value. Value and cost per sale have a habit of varying hugely – hence their importance to marketers.

For example:

  • The value of an insurance sale will depend on the annual premium income, the probability of lapse or renewal, and the likelihood of a claim
  • The value of most retail sales depends on what the customer does next. Do they repeat, buy something different, or never use the retailer again?
  • The value of a media subscription relies mainly on their longevity, but can include some cross sales
  • The value from recruiting charity donors is based on the expectation that they will continue to act with generosity.

It’s quite a challenge however to think of a category of sales where there is just a single fixed value. A few come to mind, including:

  • Estate agents selling houses are unlikely to factor in an individual’s next purchase
  • Repeat funeral plan sales are rare, unless the purchaser is buying additional plans for their loved ones
  • One trip on a Virgin Galactic VSS space plane should be sufficient for most people!

Investing where the value is

But understanding the longer-term value of each sale can secure a company’s future because its marketers can place their marketing investments where the value is. Here are a couple of examples:

  • One of our retail clients is selling a product for which there is no necessity for customers to repeat purchase. Nevertheless, it has enormously divergent examples of customer behaviour when it comes to doing so. The bottom 50% of customers recruited have an average life-time value of £50, while the top 5% have an average of £2800.
  • When we analysed the value of policies sold by another client, a life insurance distributor, we found that, depending on where and how the customers were recruited, the contribution per policy sold varied from + £404 down to – £277, after taking into account marketing costs and expected clawbacks from lapsing.

So why do marketeers shy away from looking at the value they are really creating, and yet invest time in looking at explanatory metrics, such as cost per click-through, or the number of impressions? We guess it’s because predicting longer-term value goes into the ‘too difficult’ category and gets conveniently ignored.

But for those prepared to take the plunge and align their spend to longer-term value, there are two necessary parts to the analysis – accurate marketing attribution to determine the cost of making each individual sale, and an approach to predicting the longer-term value of each sale once it has been made.

Determining the cost of each sale

Acknowledging the fact that in today’s world most sales come at the end of a customer journey, this requires joining together the steps in each journey and then understanding what they cost to deliver.

As the charts below show, customer journeys may involve multiple channels and continue for some time.

Distribution of Distinct Channels in Customer Journeys

Distribution of Customer Journeys length

 

The technology required to do this must link both online steps – such as click-throughs to a website from social media – and offline steps, like receiving an item of direct mail. Having joined the steps together, there is the question of how much they each cost. In our opinion, that should be the cost of a campaign, divided by the number of steps where it contributed to journeys that end up with a sale actually being made.

An email campaign may be sent to 10,000 people, but only contribute to 100 sales, so the effective unit step cost of the campaign is just 100th of the overall cost. This calculation can then be further refined by sharing the sale value disproportionately between the steps that led up to it, according to the relative contribution to the sale that they made. Having attributed a cost to each step, these can be summed up to provide a cost per sale.

Predicting longer-term value

Deciding how to do this will be driven by the industry sector and the sale type being made, whether, for example, it is a sale recruiting a new customer, or one to an existing customer. If we take as an example just one type of sale, like an insurance policy or a media subscription, then predicting lapse becomes critical to the value equation. There are many different techniques for doing this, but our preference is to use CHAID* to predict the overall probability of someone lapsing within a given time period.

Chaid Model diagram

This kind of technique will divide policies sold into distinct groups, each with a different expectation of lapse rates, based on the known characteristics of the customer and the policy they have bought.

The next question is: when will they lapse inside that period? This is where we use historical evidence based on different lapse timing for different cohorts of policy purchases. If, however, the sale is a retail one, then we will be looking to forecast for each recruit their expected future value within the next season or year. Every business will have its own unique requirements for predicting longer term sales value.

Providing the best ROMI

All this may, when viewed in the round, look somewhat difficult to achieve and there are many compromises that can be made when aiming to link marketing investments to their future value delivered. Costs per sale may be grouped into costs for a particular product category and value may be averaged over a large cohort of sales.

However, we strongly believe that, given the vastly varying value of individual sales made, and the importance of recruiting customers that provide the best ROMI, it is essential to go down this route.

*CHAID analysis (Chi Squared Automatic Interaction Detection) is a statistical technique is used in market research.

 

UniFida logo

UniFida is the trading name of Marketing Planning Services Ltd, a London based technology and data science company set up in 2014. Our overall aim is to help organisations build more customer value at less marketing cost.

Our technology focus has been to develop UniFida. Data science business comes both from existing users of UniFida, and from clients looking to us to solve their more complex data related marketing questions.

Marketing is changing at an explosive speed. Our ambition is to help our clients stay empowered and ahead in this challenging environment.

Marketing Attribution – is there a Knowledge Gap?

Unifida’s Client Services Director Jo Young reflects on the recent Direct Commerce Association (DCA) Summit:

I was fortunate enough to be asked to speak at the recent Direct Commerce Association (DCA) Summit in London. It’s a popular, friendly event, attended by a range of direct and multichannel retail businesses at all stages of growth, serving both niche and mainstream market segments.

The agenda was packed with retailing ‘hot topics’ and sessions sharing knowledge and experience between businesses. I gave a presentation on how omnichannel marketing attribution measures the way that channels work together, and how companies can use this to optimise their budgets. I outlined how one of our clients, Wentworth Wooden Puzzles, introduced attribution, and how the company is changing its focus on different media for different customer types to maximise the marketing budget.

With marketing budgets being heavily scrutinised, there is a constant pressure to prove marketing return and tighten up on waste. Omnichannel marketing attribution measures the way that channels work together (whether they are trackable or non-trackable) and helps optimise precious marketing budgets.

Earlier in the day at a panel session on Marketing Metrics, attendees were asked if they had any form of marketing attribution in place. Only a handful of people from the large audience raised their hands. This was startling and revealed a key marketing attribution knowledge gap – not only in attribution, but probably in the true effectiveness of marketing budgets too. Speaking to delegates afterwards, some said that, when it comes to marketing attribution, they did not know where to start, or thought it would be too expensive.

While many companies recognise the need to have accurate media metrics and spend their budgets wisely, they don’t realise that there are easy, cost-effective marketing attribution solutions out there that make the most of their first-party data, and can help them report accurately in order to optimise their marketing resources.

To see attribution explained simply, you can watch UniFida’s video on attribution basics.

In our Resources section, we also have a variety of articles on how organisations can benefit from attribution, including a blog post on measuring the long term impact of direct mail over other channels.

 

UniFida logo

UniFida is the trading name of Marketing Planning Services Ltd, a London based technology and data science company set up in 2014. Our overall aim is to help organisations build more customer value at less marketing cost.

Our technology focus has been to develop UniFida. Data science business comes both from existing users of UniFida, and from clients looking to us to solve their more complex data related marketing questions.

Marketing is changing at an explosive speed. Our ambition is to help our clients stay empowered and ahead in this challenging environment.

Marketing effectiveness – measuring the long-term impact of direct mail and other channels

In our previous blog post on return on marketing investment (ROMI) and seeing the bigger picture in terms of measuring the effectiveness of all marketing channels together, we explained why it is important to not only calculate return, but also track it over time.

The question is: what do you do if a marketing channel shows a declining trend, or if its ROI is less than other channels?

Pulling customers through the sales funnel

The temptation is to pull back tactically on that particular channel in favour of less expensive, and arguably more effective, channels. Moving the marketing budget to maximise effectiveness can happen frequently – however, most marketers know intuitively that channels can and should work together to pull customers through the sales funnel. This is often difficult to prove because media reporting is usually ‘last click’ only and/or is not granular or complete enough across all channels.

Some channels are more effective at influencing and raising awareness, others are better at converting and some work best in combination to keep the customer in the sales mindset. So, how do you prove this to a board of directors who may be looking for marketing budget cuts and who perhaps only see a sizable difference in cost of sale and ROMI between channels? And how do you know the longer-term impact of pulling back on some channels in favour of others that seem to be more effective?

Direct mail resurgence

Direct mail is a good example of a channel that, on the face of it, can be rather expensive and may be at the top of the list in terms of budget cuts. However, direct mail has seen a resurgence during the global pandemic period and, although it is still seen as expensive, it has some very interesting marketing characteristics.

Interestingly, in our recent blog post on measuring the carbon footprint of various marketing activities, Kg CO2 per sale for email was shown to be higher than for printed direct mail.

At UniFida, we have been studying direct mail results using our unique marketing attribution solution, which provides detailed ROMI over time for different channels. It also shows where in the sales funnel each channel is most effective with particular types of customers – i.e. existing customers, or those new to a brand.

Retail example

One of our retail clients is seeing some interesting results. In the graph below, direct mail in the form of catalogues is seen as most likely to impact sales in combination with another media channel and, by contrast, Search Engine is most likely to act on its own.

marketing channels working together graph

As this client expected, the ROMI for direct mail is lower than a number of other channels, but it is having the strongest influence at the start of the sales funnel – meaning that it is creating awareness, leading to new sales through encouraging steps, such as searching online and creating sales that otherwise would not have happened.

This is illustrated in the chart example below where the strength of direct mail activity is at the Initiator stage (the start of the sales funnel) against other channels. By comparison, for this company email has a stronger influence in the sales Closer stage.

Media influence in the sales funnel graphWhen we looked at the impact of media in converting new customers, the % influence of direct mail (catalogues) at the start of the sales funnel was even more pronounced, but email was less of a Closer and its influence on new sales was more evenly split across the sales funnel.

Quite often companies have individual contact details and permissions for direct mail and not for email, as customers find the former less intrusive. ‘Cold’ direct mail is also an option, with quality data providers offering targeted individuals with permissions to mail.

Speak directly to a targeted audience

Direct mail can work well for even the most complex propositions and, with third-party cookies being phased out, it represents an opportunity to speak directly to new, highly targeted audiences. It is also easy to test – however, it’s important to ensure that your measurement looks at the bigger picture in terms of ROMI.

Direct mail may also be adding to the effectiveness of the entire sales process, so you need to evaluate how it is bringing in more valuable customers than would otherwise be difficult to reach.

So, when looking at your marketing results, the challenge is to step back and examine the long-term impact of the marketing mix. For every channel you should consider the balance between individual channel ROMI, the interactions between channels and the role each is playing in funnelling sales.

Proof of concept

UniFida can deliver the required expertise and technology ‘out of the box’ to help you automate ROMI evaluation. We can start with a low-cost proof of concept to demonstrate how ROMI can be calculated for your business.

For more information email [email protected] or call + 44 203 9606472.

UniFida logo

UniFida is the trading name of Marketing Planning Services Ltd, a London based technology and data science company set up in 2014. Our overall aim is to help organisations build more customer value at less marketing cost.

Our technology focus has been to develop UniFida. Data science business comes both from existing users of UniFida, and from clients looking to us to solve their more complex data related marketing questions.

Marketing is changing at an explosive speed. Our ambition is to help our clients stay empowered and ahead in this challenging environment.

Return on marketing investment – the importance of seeing the bigger picture

To use a couple of sporting analogies, every marketer wants to score the equivalent of a bullseye or a hole in one. In other words, achieve a high score with the minimum effort. But just as in sport, it’s not always an easy task – however marketers can hit their targets by relying more on expertise and data, rather than just chance.

It starts with accurate media reports measuring the effectiveness of marketing efforts and investments. A lot of companies make do with media reports that are either not holistic – i.e. they focus on one channel and don’t take into account the existence and impact of other channels – or they are just a ‘snapshot in time’.

In other words, we need to look at the ‘bigger picture’ in terms of measuring the effectiveness of all marketing channels together, as well as any seasonal variations.

Be strategic

This approach should be strategic rather than tactical; companies need to look at marketing metrics in the longer term, rather than take the short-term view. Not looking out beyond the immediate horizon can result in:

  • missing a steady decline, or increase, in a channel’s performance
  • a lack of insight into the performance of each marketing channel at different times of the year, so not understanding seasonal impacts
  • not determining the ability for one channel to boost the performance of another when it is switched on
  • not recognising the impact of budget reductions in one channel on another.

It seems that few companies are stepping back and looking at trends over time, with all the channels measured together. Econometrics studies go some way towards helping to achieve this which, although useful, can be time-consuming and expensive. Also, they don’t provide a clear view of the effects of seasonal marketing activities.

More importantly the outputs don’t have the level of detail – such as campaigns and keywords – typically needed to optimise digital channels and direct marketing.

Optimise channels’ ROMI over time

What is needed is an attribution solution that provides detailed Return on Marketing Investment (ROMI) data over time, measuring digital and direct channels alongside each other, with the ability to drill down forensically into campaign detail.

Such a solution can even indicate at what stage of the sales funnel each channel and campaign are most effective and with which type(s)of customers – i.e. existing customers or those new to the brand. The ability to easily see such trends in marketing performance over the long term reveals a number of key truths, such as:

  • an overall decline or increase in the efficiency of all channels
  • natural variation in ROMI due to seasonality, and
  • the interaction (dependence or cannibalism) across different channels.

An attribution solution with built-in ROMI measurement over time enables marketing teams to step back and take a fresh look at their marketing budget and media mix. It empowers them to make well-informed, multi-channel decisions about how to drive more sales from the right types of customers and deploy the whole marketing budget more effectively.

UniFida logo

UniFida is the trading name of Marketing Planning Services Ltd, a London based technology and data science company set up in 2014. Our overall aim is to help organisations build more customer value at less marketing cost.

Our technology focus has been to develop UniFida. Data science business comes both from existing users of UniFida, and from clients looking to us to solve their more complex data related marketing questions.

Marketing is changing at an explosive speed. Our ambition is to help our clients stay empowered and ahead in this challenging environment.

Cutting marketing budgets

Wielding the axe on marketing budgets – how can you cut creatively?

In today’s challenging times, many organisations are looking to reduce their marketing budgets while minimising the overall impact on sales.

Of the £20 billion+ spent per annum on marketing in the UK, the challenge is to identify which parts of a marketing budget are actually wasted. If you Google ‘How to cut my marketing budget’ you will find yourself flooded with generic advice, but no specific guidance on how or where to wield the axe.

So, you need to be creative. Here are some specific questions you need to ask when assessing your marketing budget allocation:

1. Which customer segments should we focus our marketing budget on?

This question should always be asked at the start of a budget reduction exercise – and the answer may not be what you expected. For instance, at UniFida we recently discovered that for an insurance client of ours their least affluent customers were providing the highest longer-term value per sale.

As well as investigating specific market segments, you should look at splitting your investigation between the impact of marketing to recruit new customers compared with spend on existing customers. Both will respond in very different ways to similar campaigns.

2. Should you start your investigations at a channel or a campaign level first?

The problem with starting at a campaign level is that you are very quickly swimming in the weeds. You may find that there are literally hundreds of campaigns when you look across all your channels and by axing individual ones you are ignoring what their cumulative effect is, as well a potentially stopping, say, the worst ten emails, when in fact they perform better that some of your AdWords campaigns.

We suggest you start at the channel level and aim to get to the same marginal ROMI (Return on Marketing Investment) for each one. If you can achieve this then you will have a perfect channel level budget distribution. The marginal ROMI can be described as the return from making a small increase or decrease in the spend for any channel.

To measure marginal channel level ROMI you will need some quite specific tools, a description of which comes later.

3. Having fixed your channel level budget allocation, how do you progress with campaign pruning?

An initial risk is that some campaigns do not need to be axed – they may just need better targeting, or revised content. Clearly these problems need to be dealt with before any cuts are undertaken.

Then, turning to the individual campaigns, you must regard each one as part of an overall marketing ecosystem that, working in combination, encourages customers to undertake customer journeys that may or may not end in a sale.

steps in customer journey diagram

So, you will need to judge the effectiveness of the campaign in terms of how much it contributes overall towards the journeys that lead to a sale, but you may also be interested in the role it plays in initiating, holding, or closing sales.

To achieve both of these you need to know where events created by the campaign crop up in your customers’ journeys and what impact they have. As an example, a social media campaign may be very good at getting new customers to visit your website, but it may need some PPC support to get them to actually purchase.

What specialist tools do you need to achieve all this?

All this will only become achievable when you start examining your marketing effectiveness at the granular level, i.e. each step in a customer journey. A step may be receiving a catalogue, opening an email or a visit to your website from a referrer.

In combination, and ignoring indirect channels like press or TV for a moment, these steps in your customers’ journeys are what marketing delivers. On average there are around three steps preceding each sale, but some journeys will consist of one step, or others twenty.

 

The right tools for the job

With this in mind, you need a tool that gives a value to each step based on its contribution towards a sale and allows you to aggregate these steps up to all those created by a campaign, and then up again to all campaigns that take place in a channel. (Interestingly there are many questions around timing in this as well because campaigns can have long tails).

This requires technology to link online and offline customer journey steps and then give to each step a weighting based on the contribution it makes to the overall journey.

Alternatively, if you are looking at indirect channels like press and TV, then you need to introduce an entirely different technique, ’econometrics’, which will also determine the value they contribute towards your overall sales. Econometrics works in a very different way by examining the impact of changes in the spend in any channel over time on the overall level of sales.

How UniFida can help

UniFida provides a one-stop shop for delivering the tools and services for both of these approaches – customer journey attribution for direct channels’ ROMI and econometrics for indirect channels. We can also help with a proof of concept to demonstrate just how effective these approaches are.

For more information email [email protected] or call + 44 203 9606472.

UniFida logo

UniFida is the trading name of Marketing Planning Services Ltd, a London based technology and data science company set up in 2014. Our overall aim is to help organisations build more customer value at less marketing cost.

Our technology focus has been to develop UniFida. Data science business comes both from existing users of UniFida, and from clients looking to us to solve their more complex data related marketing questions.

Marketing is changing at an explosive speed. Our ambition is to help our clients stay empowered and ahead in this challenging environment.