ROI | Forest Full of Trees

How much money should you be allocating to each channel in your marketing mix?

One simple answer is that you should calculate the ROI of each channel and then shift your budget from the less profitable channels into the more profitable ones. But, even leaving aside various challenges with measuring ROI across a multitude of digital and offline channels, this approach is problematic even assuming you could get accurate numbers. It fails to take all sorts of factors into account, such as the value of emerging channels versus established ones, the difference between awareness marketing and lead generation, and the impact of one channel on another to create a sum greater than its parts.

But the opposite approach — not measuring at all, but simply planning budgets by instinct or by what “feels” right, is even worse. If you have no idea how your various tactics are performing, then you’re flying blind. And as demonstrating ROI becomes increasingly important for marketers, there’s no way that such a laissez-faire way of planning is going to work for very long.

It occurs to me that we need a different approach — one that takes a holistic view of multiple channels and tactics, and drives towards a common goal, but which allows for different performance objectives for each tactic.

Such an approach exists. Our friends in the financial planning industry have been using it for years. They call it portfolio planning.

Continue reading “A portfolio approach to digital planning”

In digital marketing, we like to claim that we have a huge measurement advantage over traditional marketing. After all, we can measure everything, right? Every click, every interaction, every tracking parameter, every bounce, every goal conversion. The technology that we have takes the guesswork out of measurement and allows us an unprecedented amount of insight into exactly how each and every person is interacting with our brand.

The traditional marketers are at a disadvantage, or so the theory goes. The television and broadcast guys parrot the value of eyeballs and impressions, but can only guess wildly at what impact all those impressions actually have on sales. Even the direct marketing guys – the traditional measurement gurus – have to add codes to their pieces, and even then, they only have data for the small percentage that come back. They make sweeping generalizations about things like demographics, geographics, pass-along rates, and more, in lieu of more solid data. They run expensive market research surveys to try to correlate the data. Measurement in traditional marketing has always been a bit like decorating a grain of rice with a paint roller – effective, but not very precise.

Digital marketing ought to be better at measurement. Miles better. Instead, however, we're still lagging behind. According to eMarketer, as recently as last year, 50% of marketers cited "achieving measurable ROI on my marketing efforts" as their leading priority, but only 16% were measuring ROI for their social media efforts. When asked to describe in one word how they felt about online measurement, the words that marketing professionals came up with most frequently were "confused", "nascent", and "stalled".

Clearly, the potential for measurement in digital is enormous, but we have a way to go before we get there. There's a gap, in other words, that exists between the vision and the reality.

Here are a few reasons why this might be so:

Continue reading “Why does digital measurement lag behind traditional?”