The Imperfect Science of Return On Investment

by | Aug 18, 2015 | Marketing and Advertising Insights, The Not-So-Secret Writings of ScLoHo

When I talk to business owners and managers about advertising options, they want to feel good about the money they are going to spend.

Did you see that?

They want to feel good.

They want to feel smart, confident, happy and wise.

Often times this feeling comes from examining facts and figures and from calculating the Return On Investment they will get from spending (investing) in advertising.

This is such an imperfect science that we should eliminate it all together but like I said, people want to feel good when they are going to spend money.

I was talking with a friend recently and we came up with a return on investment that looks like this:

For every $3000 he spends, he needs 3 sales to break even and the 4th sale produces a profit. This is based on 3 years of being in business and the knowledge that he has of his average sale, expenses and those operating numbers.

Great information, I wish more business owners knew this.

What we don’t know is how to accurately track the Return On Investment of each individual advertising and marketing message he has out there.

Here’s why:  His truck is logoed up and has his contact info.  When he is driving down the road or sitting in traffic, his truck is planting  marketing seeds (impressions) on future customers. You can’t accurately measure the Return On Investment of his vehicle wrap can you?

He takes part in some consumer trade shows.  Hundreds of people have seen his display and dozens have spoken with him each year.  Only a small percentage of the people who see his display (the ones he talks to and gets contact info from) are trackable for Return On Investment measurement.

Advertising and marketing messages overlap.  We are exposed to a business via multiple methods which nullifies the results of tracking the Return on Investment of each individual advertising and marketing message.

The web was supposed to be the ultimate source of accurate and fool proof tracking, but it falls victim to the same limitations of measurement that off line marketing has.

You could try combining the two which might help, or produce some really weird and useless ad campaigns like this one from 2012 that tried combining Billboards with QR codes:

The Unscanable QR Code

The Unscanable QR Code

So how do you deal with Return On Investment as a way to measure the success of your advertising campaign and more importantly how do you feel good about spending money on advertising?

Ask the right questions.

Know the limitations.

Deal with trustworthy people.

More on this Wednesday.

The Web has Changed, Have You?

The Web has Changed, Have You?

by | Jan 2, 2012 | ScLoHo's Web World

Last week I mentioned that I was making some adjustments to this website and I’ll share more Tuesday about why.

However as many of you have the day after New Years day off today, I thought we’d take one last look back at 2011 and the changes coming this year as we kick off ScLoHo’s Web World with this piece from Mediapost:

Looking For Direct Paths To Consumer’s Heart

by Aaron Baar

The past year may have been the year of the tablet, and the smartphone and the “third screen.” But if the top 10 read stories on my technology and electronics beats are any indication, marketers are still looking for the best ways to reach consumers with strong messaging, whatever the media.

Take the top story, New to Macy’s Spring Lineup: Custom QR Codes. With so many marketers trying to figure out how to get consumers to bridge the gap between the online and offline worlds, an innovative technique, like Macy’s “Backstage Pass” — which gave consumers access to exclusive behind-the-scenes content and fashion advice via mobile 2D barcodes — was a natural draw.

Similarly, stories about Sony’s social media-driven campaign to have consumers submit stories to be filmed and broadcast in 3D and a joint Intel and Toshiba project to create a suspense film through crowdsourced content, were all about finding innovation in unexplored territory. As every new technology hatches new ways to reach consumers, marketers and the brands they represent are naturally interested in groundbreaking ideas and envelope-pushing programs.

Yet, for all those programs, marketers haven’t lost sight of understanding that it’s not necessarily the project, but the way it connected with consumers that’s important. Some of the top stories picked out of the technology space were about what mattered to consumers, whether it was how to make messaging relevant in the mobile space, the idea that the smartphone has become a communication device for the whole family, the idea that consumers are willing to pay a premium for brands that add simplicity to their lives, or even just understanding that consumers are still using that old standby, the Sunday newspaper, to clip coupons during tough economic times. Even a story about the phenomenal viral success for a corporate video about a product as mundane as glass shows marketers still want (and need) to know what resonates with consumers.

Finally, in a year and a field dominated by Apple, it’s not surprising to see the company at the center of two of the most-read stories in the technology space. In both cases, however, the stories were not about Apple’s latest innovation or rumors about the newest must-have device. Instead, both stories concerned how Apple’s competitors could market against the company’s phenomenal buzz when it comes to smartphones. One story focused on how Android makers could focus on their positives (specifically network speed) to compete against the latest iPhone iteration. The other showed how one such competitor, Samsung, was going about it (by mocking the hipsters and “artists” who miss out on the Next Big Thing, because they’re waiting in line.)

Those two stories seem to prove that no matter how much everyone loves Apple, we still are looking for ways to take it down.