Return on Investment: the new mantra of ad agencies and marketing managers. For anyone who sells advertising, it’s our latest bugaboo. No one questions that we need to better understand how wisely we spend our advertising dollars, but it’s just that the latest mania, is, well . . . mania.
The risk to this mania is that the growing demand for ROI could backfire on agencies and ROI-seekers because they fail to deliver the “evidence” to their bosses and clients.
Return on investment originally took root from the progenitors of direct response, gambling, and investing. Easy quid pro quo. You put your money down and then watch it either disappear or compound. Easily measured.
When it comes to advertising, reading ROI becomes more complex, unless one tries to move an inventory of sweaters with heavy discounts in a limited period. The focus on ROI—and nothing but ROI—ignores the fact that response from advertising can exist, but the gratification comes later. Half of the value proposition advertising offers builds a memory that will stick with consumers, in anticipation of that moment when they are ready to purchase. Although it’s out of vogue right now, building brand and creating top-of-mind awareness among prospective buyers of products is still the best way to “move the merch.”
Frankly, the Web created this monster. Marketers who have used the Web for any period of time know that online response rates are, on average, one-half percent to 1 percent. Direct mail, the closest thing to a tried-and-tested science in consumer response, has yielded 1 to 3 percent returns for the past half-century. Yet response expectations continue to be both unrealistically high and wrongly applied to all forms of advertising.
This mentality is eroding confidence in proven and tested advertising methods. CEO’s who demand immediate results from their marketing expenditures need to understand that relationship building is still central to selling their product. It takes time, as well as savvy media selection, great creative, and clever messaging.
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