BrainTrust Query: How to Increase Marketing ROI in the Digital Age

Discussion
Nov 10, 2011

Through a special arrangement, presented here for discussion is an excerpt from an article from the Joel Rubinson on Marketing Research blog.

Based on conclusive findings in the early 1990s that the first ad exposure has the greatest effect on sales, the concept of recency planning was created and has changed how media is placed. Prevailing wisdom is now that a marketer needs to stay on air consistently because, that way, it is more likely you will deliver an ad impression to someone who is about to buy, than by using heavy-up pulsed flights of advertising interspersed with periods of going dark (which was the prior thinking.)

If you could, you would drop impressions selectively for each consumer closer to the next purchase than the last one. Now, in the digital age, you can do exactly that.

The principle of recency implies that the sales response to ad spending (called ad elasticity in economics-speak) can be thought of as an average of no effect from the ad that is unfortunate enough to air right after a given consumer’s purchase, averaged in with twice the effect for an ad that is lucky enough to air right before the next purchase.

Why does this math matter? Because if you could find advertising vehicles that were "recency-tilted" by their nature, that is, more likely to deliver impressions closer to the purchase, you will get greater ad response — practically guaranteed.

So how do we reach the "readier" to purchase consumer? How do we recency-tilt? Digital activities that are self-directed — e.g., search or visiting a brand’s website or a site like coupons.com — are mostly done with shopping purpose in mind. In other words, such digital brand communications give you recency because the consumer is controlling the timing of the impression not the marketer.

Digital display advertising can also be recency-tilted if marketers change their prevailing approaches to display. Remarketing has been proven to provide greater lift and that is certainly recency-tilted. Advertising served by ShareThis has been shown to provide greater conversion and it is also recency-tilted because advertising is selectively served to people who share content that is relevant to them at the time, implying for many that they are about to make a purchase decision. Digital media’s ability to deliver recency will get magnified as smart mobility becomes a constant part of the shopping process.

But the way, media and marketers calculate reach should be adjusted also. If impressions unfortunate enough to be delivered right after the last purchase aren’t worth much, then their contribution to reach isn’t worth much either. Marketers should measure reach from those impressions delivered closer to the next purchase than those closer to the last purchase. Once you start calculating recency reach, you will find that the touchpoints that deliver this are different and it will help to guide marketers’ strategic media investment decisions in ways that will improve sales response.

With some straightforward experimentation, I believe the logical conclusions here will be confirmed. And then, the way we plan media will be profoundly affected.

Discussion Questions: Do you see digital activities as a way to target ads to consumers with greater recency, or closer to purchase? What do you think of the value of calculating recency reach? How may media planning be transformed with a growth in digital communications?

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5 Comments on "BrainTrust Query: How to Increase Marketing ROI in the Digital Age"


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Peter Fader
Guest
9 years 6 months ago

This is a great concept, but we’re still not particularly close to making it a reality. The vast majority of data on media exposure/consumption (mass, social) is still largely disconnected from purchasing data, so we’re still pretty far from establishing this “Holy Grail” linkage. Let’s keep striving for this connection, but let’s not raise false hopes among senior managers that it’s just around the corner….

Lisa Bradner
Guest
Lisa Bradner
9 years 6 months ago
Digital absolutely allows us to get more insight into the path to purchase and target closer and more appropriately to the stage a potential buyer is in the purchase funnel (e.g. if we understand they’re searching on “washers and dryers” they’re probably at a different stage than if they’re searching on a specific brand and model number). This is some of the work we do in in path to purchase mapping via research so we can understand, for example, when a price value offer is appropriate vs. a branded message and through what media channels it will be most effective. I think the caution here, though, is not to become such a slave of recency reach that we forget about the impact of branding. On the one hand sure, it’s dumb to show me a car ad right after I bought a car (although research shows people pay attention to those because they like to confirm they made the right choice). On the other hand if I didn’t hear about you ever and all of… Read more »
Mark Price
Guest
Mark Price
9 years 6 months ago
Digital marketing is one of the best ways possible to target customers and prospects closer to the purchase decision — with the only better way being mobile, where you can actually reach a customer as they are walking into the store or even the correct aisle. However, targeting customers as they are moving to the purchase assumes that the customer or prospect is moving through a relatively standard purchase funnel, from awareness to needs to category research, brand research and product selection. More and more, customers are moving through the sales funnel like a pinball machine — doing their best to ferret out which of the thousands of available sources they can trust and returning repeatedly to research before making a decision. Companies that focus on the “last” touchpoint miss the fact that they cannot control which touchpoint will be the last — the only way to “win” is to engage with the customers across multiple touchpoints and begin to build a relationship long before the sale is consummated. Recency may not be as good… Read more »
M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
9 years 6 months ago
From the get-go, the author should have specified that this discussion was about so-called “digital media” (“Digital Age” in the headline doesn’t cut it). Some of his references indicate otherwise, such as “on air,” “heavy-up,” and “pulsed flights” of advertising which infer classic print and broadcast mass media. Additionally, “ad spending” is mentioned, leading the reader to incorrectly assume that the remarks apply to traditional mass media. Contrarily, consumer-targeted “ad spending” for digital media is very inexpensive considering that most of it is via email where spending isn’t an issue. If the writer is also referring to paid-for ads placed on websites, one must understand that it’s not targeted to the so-called “principle of recency.” Instead, it’s more of a broadcast medium than one which is targeted to a specific shopper based on their purchase history and timing. This all-over-the-place “exerpt from an article” is strictly hypothetical and only potentially useful when three things happen: First, digital media proves to make a difference. Second, as the author writes, “With some straightforward experimentation, I believe the… Read more »
Dan Frechtling
Guest
9 years 6 months ago

A better term than recency is probably “readiness,” since we are talking about predicting the future. To that end, there are some good principles above, including

1. People researching products online demonstrate readiness to buy those products
2. People sharing content may demonstrate readiness to buy those products
3. People walking into stores demonstrate readiness to buy that store’s inventory

In the first two cases, these consumers can be targeted and re-targeted with display ads. In the third case mobile advertising may work.

Here are a couple more:

4. Those who are searching for products demonstrate readiness.
5. Those who buy consumables demonstrate readiness after the typical purchase cycle has elapsed

The fourth group can be reached through search engine marketing and display ad re-targeting triggered by recent searches. The fifth opens up a gold mine for retailers who can tap purchase history and reach shoppers via email, alerts or other push vehicles.

In all cases it’s not enough just to reach shoppers. Testing incentives to get them to act “now” instead of “almost now” will accelerate readiness and beat competitors.

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