Marketers and agencies must learn to demonstrate advertising effectiveness

09 August 2017 13 min. read

Global advertising expenditure is at an all-time high, valued at more than $500 billion. While practically all marketers agree that measuring advertising effectiveness is key to ensuring value for the huge flow of funds into the industry however, actually doing so remains a daunting task. With increasing competition entering the industry developing new metrics for this measurement has become essential.

In a fast-paced world of constant innovation and market disruption, strong marketing has become more important than ever before, with companies needing to make increasing efforts to distinguish themselves from the growing number of competitors in their segment. As a result, investment in advertising presently sits at an all-time high. With global expenditure on advertising exceeding $500 billion in 2015, having since grown by an estimated 5.2% in 2016, it has become increasingly important to craft sound marketing strategies, including a solid plan for executing them further down the line.

Marketers therefore find their hands full with executing marketing strategies, aimed at awareness, branding, sales, or a combination of the three. At the same time, with growing stakes, it has become increasingly important for marketing experts to validate that record spending by demonstrating a concrete return on investment (ROI). The marketing industry as a whole is picking up on this – according to new research drawn from a survey of over 2,700 marketers in nine countries*. The study, conducted by Research Now together with Econsultancy, shows that almost all brand and agency marketers now understand the importance of analytics and campaign-level measurement to prove the effectiveness of their advertising services. A quarter of all brands meanwhile rate this factor as ‘extremely important’ to their business.

“With only 3% of brands and 4% of agencies not measuring the success of their advertising campaigns, the need for measurement is evidently acknowledged by marketers,” said Monica Savut, Head of Commercial Research Services at Econsultancy, following the release of the 'What Advertising Effectiveness Means to Modern Marketers in a Digital World’ report.

Thinking about your typical advertising campaign

Marketers are aware of the importance of validating their advertising, both at a campaign level and in the context of their broader marketing objectives. Three in five brands consider measuring effectiveness to be ‘very’ or ‘extremely’ important, while 64% see advertising effectiveness as ‘very’ or ‘extremely’ important to broader marketing objectives. More than 60% of client-side marketers meanwhile used ‘surveys to test advertising effectiveness provide a strong indication of the success of an advertising campaign,’ with 54% agreeing that such surveys are essential to validation of their work. An even higher proportion of 72% saw market research as playing an important part in measuring the effectiveness of advertising.

While social media engagement and increased brand awareness were backed by 45% each of internal marketers, external agency marketers were more inclined to back social media engagement over brand awareness at 46% and 41% respectively. With social media analytics giving a more rapid view to engagement with a brand, agency respondents favoured the more fluid data this allowed for – as working on a case-by-case basis rather than a long-term strategy, this gives a rapid impression of the effectiveness of their work. However, it also offers less of an insight into the long-term permeation of a brand into the awareness of consumers, something that company marketers retain a higher concern in, in order to build for a marketing strategy that drives sustainable growth rather than sporadic spikes in market interest.

How do you currently measure the success of your advertising campaigns

Importantly, success of a campaign was shown to correlate with spending to an extent. While the majority of firms placed themselves modestly in the middle ground of measuring marketing effectiveness, regardless of spending, when spend on advertising was cross-tabulated against digital advertising effectiveness, the findings revealed that those spending more than £100 million on advertising were more likely to rate themselves as ‘extremely effective’ at digital advertising (13%) than those spending less than £500k (2%). There was also a slight trend across all ratings of effectiveness towards a lower spend correlating with a higher likelihood of ineffective measurement.

According to Tom Swenson, Vice President of Product Management for Advertising Solutions at Research Now, the analysis confirms marketers across the industry now recognise the need for accurate measurement of the effectiveness of advertising campaigns and validation of audience reach and targeting. “Access to data and insights and true single-source measurement solutions are critical to making better informed decisions about advertising planning and execution,” Swenson concluded.

Objectives for advertising

The report also shows that the most commonly prioritised objectives for advertising are increased sales, with 63% of those polled placing it as a key criteria, just ahead of new customer acquisition at 61% and brand awareness on 39%.

Thinking about your advertising campaigns

Again there was a small yet notable gap between agencies and in-house marketers when it came to long and short term objectives. Driving traffic to a website and increasing engagement both showed 25% of company respondents rating the factors as a priority, compared to a higher 27% of agency employees. Both again are relatively short term goals for campaigns which can be observed rapidly with spikes in web activity and ‘engagement’, which as previously mentioned can in a large part be determined via social media being joined by supporting a product launch as the third category where more agency respondents than company marketers set the most common goals.

The study further looked into what advertising breakdown looks like. Marketers were asked to split their budget across the headline media channels for a typical campaign. The average company marketer placed a quarter of budget with digital (25%), just over a fifth with print (21%) and 13% with TV. In contrast, agencies said that their typical clients spend 16% of their budgets on TV, and 19% on print, with the largest number of 26% prioritising digital.

Not surprisingly then, as with many other industries, the use of digital on the rise. Over the past couple of years, digital has emerged as an effective channel to reach the increasingly technology-literate consumer, particularly when targeting millennials. The most recent eMarketer predictions of time spent with media show that, adults will spend almost six hours per day using digital media in the US alone, leveraging a host of different technologies including mobiles, desktop/laptops and other connected devices. This new age of multi-screening behaviour provides numerous opportunities for serving ads, and improved tracking of digital ads have combined to focus marketers’ attention on the channel.

Though the potential “viral effect”, where sharing through social media rapidly sees posts amass thousands of engagements, lower cost and measurability of digital have meant it has become an appealing media choice for marketers. However, while this short term benefit can deliver a quick boost to companies’ profiles, measurement studies have shown that campaigns that achieve long-term effects are more focused on the traditional mediums of TV and video.

When asked about amounts budgeted specifically for digital advertising, respondents revealed that social media receives on average 25% of budgets, followed by paid displays like website banners at 19% and sponsored search results at 18%. Over 40% of respondents agreed to some extent that too many digital advertising formats exist, which can lead to apathy among consumers, or worse still for advertisers, drive them to technology like Ad-Blocker to avoid the glut of digital marketing targeted at them whenever they open a computer. However despite this risk, which is far lesser in traditional, non-user controlled media like newspapers and television, a far higher proportion of 83% stated that digital advertising remains an essential part of their wider marketing strategy.

A daunting task?

Despite all the financial muscle behind the plethora of advertising options available, in an era of multichannel campaigns with complex layered strategies, ensuring that campaigns are a success can be challenge, the report also shows that confidence in the effective reach of advertising could be higher. While 59% of company marketers and 49% of agencies asked said they were ‘confident’ of reaching the right audience, only 38% of all respondents were confident that they are using the right mix of channels to do so.

How confident are you that your advertising is reaching the right audience

The most sophisticated method of statistically validating the media mix is through attribution modelling. Tasked with unpicking the effects of different media and attributing the sale or other metric to a specific media or channel, these models have grown considerably in complexity in recent years.

However, this can require large quantities of good quality, clean data to make the models function correctly, and often brands lack the in-house skill so need the external expertise of agencies to make the use of attribution worthwhile. As a result, its use is far from mainstream, which is reflected in the survey results, with only 15% of brands using it to establish effectiveness, and rising to 50% of those who rate themselves as ‘extremely effective’ at measurement

Zooming in on digital, it has become much easier to measure the component metrics that would combine into an attribution model, for example impressions, click-through rates and conversions. Unsurprisingly, these are being measured by a much higher proportion of brands and agencies, partially due to the wealth of data available, which therefore makes the area the most logical place to allocate resources toward, as marketers develop new attribution models in the area. The general lack of resources (budget, time) is however noted as by far the most common barrier to advertising validation across the market in general, according to both company (61%) and agency (51%) respondents. For those who are ineffective at measuring the effectiveness of their advertising, other barriers include lack of insight (31%) and lack of understanding (34%).

The booming revenues of advertising and design firms have recently seen them become seen as highly attractive M&A opportunities, as professional service firms look to expand into new markets, in which their analytical prowess would enable them to consistently provide reports on the effectiveness of their ad-arm’s campaigns. Should marketing design agencies wish to retain independence and remain competitive in a market which is increasingly seeing such an influx of such competitors, developing and implementing quality metrics for future projects is essential then.

Which of the following are the most significant barriers to validating your advertising

The authors from Research Now and Econsultancy end their report with five tips to ramp up advertising effectiveness. One recommendation is that marketers should spread their budgets across different media wherever possible in order to mitigate the risk of having all their eggs in one basket. For this reason multichannel campaigns are usually more effective than those focusing on a single channel, especially in relations to long-term effectiveness metrics. Secondly, the researchers suggest to combat the fear of there being too many digital ad formats, despite it being a vital part of a campaign, companies should take note of the importance of not just assigning the right budget to digital, but also getting the mix of channels right within the digital medium. Again, diversity is the key, with campaigns using two or more digital channels being found to be more effective than those using just one – however it is important not to overstretch the resource as well, as once four media or more are used, the effectiveness begins to decrease.

Marketers are then advised to focus on validating the effectiveness of each channel in relation to campaign objectives and optimising the mix from there. Segregating actions into the relevant role it is playing in the customer journey can make it easier to evaluate the effectiveness of each activity, with clearly defined KPIs based on what it is supposed to achieve. The authors also suggest prioritising the measurement techniques in line with the resources and skills at hand to execute successfully. Resources should be allocated accordingly to where size and quality of data provides the best opportunity for quality data insights. Finally the results from this improved analytical process can be used to validate the long-term use of advertising types, while companies and agencies might also benefit from running surveys – increasingly inexpensive thanks to new digital platforms – to add a qualitative human voice to the vast quantities of automated data generated.

Emphasising the findings of the document, Econsultancy’s Monica Savut said, “This research underscores the importance of validating the effectiveness of each channel and campaign in relation to your objectives and then optimising the media mix accordingly. While there’s a correlation between advertising spend and overall effectiveness, spend is not the only key success factor. Deploying key measurement techniques, prioritising them based on internal resources and skills, and never losing sight of the main marketing objectives is what sets effective advertisers apart from the mainstream.”

The full report from Reasearch Now and Econsultancy can be downloaded from this page

* The respondent base consisted of in-house marketers or brand advertisers (49%), marketers at agencies (26%), independent marketing consultants (16%) and technology vendors (9%).