Performance-Based Advertising: Knowing What Sells and What Doesn’t


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By: Michael Goodman, Senior Director of Analytics, Mercury Media Boston

According to Merriam-Webster, accountability is an obligation or willingness to accept responsibility or to account for one’s actions. However, as evidenced by the actions of Wall Street, mortgage brokers, banks, insurance companies and auto manufacturers, accountability is not in vogue today–unless you are in advertising. Today’s marketers want accountability from their agencies, demanding to see a return on investment (ROI) for their marketing dollars.

John Wanamaker, considered by many to be the father of modern advertising, once said, “Half the money I spend on advertising is wasted, the trouble is I don’t know which half.” In the 75 years since Wanamaker uttered this statement little has changed. According to the TVB and NCTA, respectively, advertisers spent over $73 billion on television advertising in 2008. But which part of that $73 billion drove sales and which part followed you and me out the door when we went to the kitchen to get a snack during a commercial break? Well, if you had been utilizing performance-based advertising, you might actually be able to answer that question.

PROVEN RESULTS
Direct marketers, unlike their more traditional brethren, have long known how to optimize their media spend to drive sales. Metrics like sales-per-spot, cost-per-lead and cost-per-sale are used every day to measure the efficiency of media buys and adjust them accordingly based upon their ability to drive sales. But despite their stated desire for accountability, marketers continue to underutilize performance-based advertising. According to TNS, only 6.2 percent of advertising dollars spent on TV in 2008 went to performance-based advertising.

In the end, this is a bottom-line driven world. If your advertising is not driving sales what are you paying for? Now that is not to say that branding does not have a role to play in the marketing mix but, in an era of accountability, marketers must demand that their agencies enhance their bottom lines. A colleague of mine, Ken Dec, points to the U.S. auto industry as a timely example. Ford, Chrysler and GM would be better-off trading-in some of their branding campaigns for more efficient pay-for-performance models. Our auto industry needs sales to boost its bottom line. Pay-for-performance television is a proven sales driver that has worked for major brands–including Proctor & Gamble and PepsiCo–and in an age of government bailouts and global recession, the automotive industry should be paying its agencies to sell cars, not place media.

While performance-based advertising is not the answer to all of what ails Madison Avenue, it is a proven method for promoting brands while delivering increased leads and sales. The trick is focusing on primary and secondary dayparts that are more brand-friendly, while also integrating both long-form programming and short-form spots that have less messaging and a simpler call-to-action.

In an age when marketers are demanding greater accountability, performance-based advertising can and will deliver ROI in a way that traditional brand advertising never will.

Michael Goodman is Senior Director of Analytics for Mercury Media.  Prior to joining the agency, Goodman was Director, Consumer Research for Yankee Group, where he provided market research, syndicated reports, decision support tools and consulting services to start-ups and Fortune 500 companies seeking to understand and profit from the impact of technology on content, advertising and consumer behavior.  During his time with Yankee Group, Goodman authored over 80 research reports, several of which received recognition for “Best of.”   Prior to Yankee Group, Goodman was a Marketing Representative at Nielsen Media Research.

Contact him at mgoodman@MercuryMedia.com

This article appeared in the January 2010 edition of Electronic Retailer Magazine

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One Response to “Performance-Based Advertising: Knowing What Sells and What Doesn’t”

  1. Tyson F. Gautreaux Says:

    I found your site via yahoo thanks for the post. I will save it for future reference. Thanks

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