Measuring Return on Investment (ROI)

Because everything is digital on the Web, we can measure most everything with numbers.

We can find out how many people have visited a website. We can view how long people stay on the site, where they are coming from, and what page they left our site from.

We can check whether they “converted”: completed a task or made a purchase that we wanted them to.

Because we can measure these things, we can gauge better than ever of whether our marketing and technology investments have paid off. Return on Investment (ROI) is an evaluation of how effective our efforts have been. ROI is a measure of how much return, in money or other user actions that will lead to money, ours efforts generated. We compare this to the costs of building, promoting, and maintaining an eCommerce site.

It is now easier than in prior decades to get a picture of which marketing efforts, such as advertising online, are working. We can also decide which to halt because they are not effective.

One-step and Two-step Marketing Processes

One-Step Marketing Process

A one-step marketing process is an effort to get consumers to purchase immediately as a result of marketing. We can measure ROI with ease: this was the cost of marketing, and this was the amount of sales generated.

Two-Step Marketing Process

A two-step marketing process is a little more complex. Sometimes a marketing team designs a website to collect consumer information. Or they create it to develop good will for the brand. Then they expect a sale at some later date. For example, a consumer requests a brochure through the website. A certain percentage will buy after receiving it. It is more challenging to measure ROI in this case.

Conversion

Conversion is the percentage of unique visitors who take a desired action online that will directly or eventually produce revenue. Conversions that aren’t immediate sales include:

  • signing up for a newsletter
  • requesting more information
  • viewing a special page
  • providing sales leads
  • downloading a white paper
  • viewing a video

A New Consumer Purchase Funnel

A purchase funnel is the sequence a consumer goes through when making a purchase. It describes cognition (thinking) on the part of the consumer.

The traditional purchase funnel goes like this:

  1. awareness – the consumer becomes aware of the brand
  2. consideration – she considers it as an alternate to other brands
  3. preference – she may begin to prefer it over other brands
  4. purchase
  5. loyalty – she decides whether to re-purchase the brand
  6. advocacy – she tells others to buy the brand
online advertising - Customer Purchase Funnell

Customer Purchase Funnel

Online Purchase Model

The online purchase funnel augments the traditional funnel. In addition to cognition, it describes consumer actions/behavior, as well as environment. It includes our ability to measure consumer behavior in terms of:

  • number of transactions
  • total value of transactions
  • total value of relationships
  • return on investment
online advertising - Customer Online Purchase Funnell

Online Purchase Funnel

The graphic above is somewhat misleading, however. The path that the consumer takes is no longer linear.

Data, Data and More Data

E-commerce and e-branding are data-driven. That is, the online marketing process is measurable at every step, because it is constantly creating data. At any given point, marketers can look at the the data related to prior efforts and change direction. Or they can test two options at the same time and decide which one has proven more successful.

A marketer must first decide what data is useful, and which is not. Then he or she must be able to analyze that data, and finally to make sensible decisions about what to do next.

Marketers use what they call an attribution model, to determine what efforts lead to a sale. For example,

  • Last Interaction attribution assigns 100% credit to the final touchpoints (i.e., clicks) that immediately precede sales or conversions.
  • First Interaction attribution assigns 100% credit to the touchpoints that begin conversion paths.
Video: Why the purchase funnel no longer exists [2014, 3:56]

Discussion

What might be the downsides of focusing solely on data and ROI?

What have you done online that you recognize is part of a brand’s two-step marketing process?

Advertising Online

As of the end of 2013, online advertising accounted for almost 21% of all advertising spends. By 2016, this number may be 27% or more. Mobile advertising is currently minimal, but will grow as the use of the mobile web continues to increase.

Advertising Online as percentage of whole

Online advertising as a percentage of whole

Online advertising can do things that other advertising cannot. The web’s strengths are connectivity and interaction.

Traditional advertising methods are losing relevance in the marketing mix.

The three type on online advertising we will review are:

  • display ads (banner ads)
  • video ads
  • email marketing

Display Ads

Display advertising is the most familiar form of advertising online. Display ads, otherwise known as banner ads, are measured in pixels. They take up a dedicated space on web page (or sometimes live on a layer above or below the webpage.)

Ad Sizes

Display ads are officially known as Interactive Markteing Units (IMUs).

Here are most common online ad size choices, as defined by the Interactive Advertising Bureau (IAB):

IAB standard ad sizes

IAB standard ad sizes

Here are two standard-size banner ads on About.com, a leaderboard at top and a medium rectangle on the right:

banner display ads on About.com

banner display ads on About.com

Guidelines

To get the most out of display ads, follow the following tips:

  • design your ad for specific sites or audiences
  • animate your ad
  • keep copy (text) brief and provocative without being misleading
  • test many design formats
  • use a professional graphic designer
  • optimize your ad to reduce file size and improve loading speed
  • check your ad’s performance daily

Interactivity

Static ads don’t move. Other ads include video. Some change on hover.

Yet these are not interactive. They are easy to ignore. Ads that are harder to ignore, like popups, tend to annoy the user and make a brand look bad.

Sometimes marketers attempt to attract viewer’s eye by using supersized display ads. Supersizes ads include 336×860 and 970×418. Some of them resize after a few seconds. These have slightly higher engagement.

Display ads have value even when left unclicked. The increase brand awareness, which is harder to measure. Often instead of clicking, a site visitor will:

  • conduct related searches
  • visit the brand’s site directly
  • spend more time on-site or more money than they otherwise would have by simply clicking

Cost per Thousand (CPM)

Display ads are typically priced on either a cost-per-click (CPC) or cost-per-thousand (CPM) basis. Ads that generate brand awareness rather than clicks may be charged according to how many thousands of views they get (CPM). While we cannot measure who actually looks at the ad, we can measure who loads a given webpage with the ad displayed on it.

Writing Display Ads

In week 2, we saw a video about 7 tips for writing search text ads. Here are some hints for writing text for display ads:

  • offer a deal that promises a discount or freebie as a prize
  • use and involvement device such as a contest or challenge
  • change the offer frequently, perhaps even daily; good ads exploit the “nowness” of the web
  • keep the writing succinct (short and to-the-point) to keep the attention of web surfers
  • focus viewers’ attention by asking provocative questions of offering knowledge they can use
  • use the ad to ask for information and opinions from users; offer them fun or captivating rewards for sharing the info
Banner ad with a contest offer

Banner ad with a contest offer

Beyond the Display Ad

There are approaches to online advertising that are more creative than display ads. Video advertising has become more common in recent years.

Video Ads

Marketers use several methods to present video ads. A familiar one by now is the video ad that precedes a video on YouTube. Just as traditional television ads do, these ads interrupt the viewing process. Other video ads live in website sidebars, and either auto-play or invite us to click play. To avoid annoying the user, they usually will not play audio unless the user clicks.

Long-Form Branded Content

Long-form refers to lengthier video ads, such as those two minutes long or more. Sometimes these videos are indistinguishable from content. Sometimes they live on the brand’s website and help the user understand a product.

Video: BMW The Hire Star 4 10 BMW M5 Clive Owen Madonna Funny Commercial BMW Film Trailer [2001, 9:03]

This is a very early web-based long-form ad.

Video: Routine Republic | 2015 Taco Bell® Breakfast Short Film [2:58]

Here’s a more recent long-form ad.

Viral Marketing

Some marketers design ads in the hope that they go viral: people share the ad to ever-increasing audiences.

Some hallmarks of successful viral ads:

  • They avoid a hard-sell. The BMW ad above never tells you to buy a BMW and doesn’t even seem to be an ad.
  • They elicit strong emotions: they are humorous, fascinating, surprising, or sentimental.
  • They make you want to share them. People that receive the share are happy to have viewed the ad, and will pass it on.
Video: Top 4 Viral Ad Campaigns [2014, 3:32]

Say NO to Crack, Say YES! to Roller Skating [2012, 1:30]

E-mail marketing

E-mail marketing is another Internet-based communication option. E-mails campaigns are inexpensive, relative to producing video ads, sending real mail, and buying ad space.

Consumers have a low tolerance for junk e-mail. The best way to get an e-mail message in front of a consumer is to have them request it.

MailChimp email marketing campaign for KidsBusyBook

MailChimp email marketing campaign for KidsBusyBook

MailChimp email marketing reports for KidsBusyBook

MailChimp email marketing reports for KidsBusyBook

Opt-in and Opt-Out

Opt-in campaigns ask the consumer to sign up for newsletters or regular promotional messages. This is often embedded in other activities the consumer is doing, such as signing up for a store discount card.

Opt-out is when the consumer chooses to unsubscribe to further messages. Once the consumer has done this, it is bad form (and may even be illegal) to continue sending them e-mail.

Link: CAN-SPAM Act: A Compliance Guide for Business

User Testing