Direct, Data-driven Marketing Increase Brand Equity
Back when direct marketing was a tribal affair and its warriors and their acolytes were constantly on the field of battle against the trendy “mad men,” it was a heresy to even consider that any marketing action that didn’t have a measurable call to action was anything but pure waste. The image purveyors had a monopoly on all of the glamor and all of the money. And they could laugh off that eternal question attributed to Lord Leverhulme: “I know half of my advertising expenditure is being wasted, but no one can tell me which half.”
Long before we had computers to churn all of the numbers, our DM tribe boasted that we could exactly determine whether the advertiser was getting his money’s worth by dividing the total advertising expenditure in each medium, or even each specific ad, by the number of measurable sales generated. When a campaign was running, the first place to stop when one got to the office in the morning was the mailroom, because that’s where the orders were.
Until the last decade of the 20th century, the concept of valuing “brand equity” didn’t exist. If you owned Coca Cola or Nescafe, what the brand was ‘worth’ was measured almost totally by the sales and profits generated in the marketplace. In 2006, “The Journal of Consumer Marketing” published an important academic article, “Measuring Customer‐Based Brand Equity” which made a compelling argument that “brand equity positively influences financial performance.” Even the most hidebound direct marketing professionals had to recognize this reality, even if they found it convenient to ignore it in their own work.
Recently, working on a project to present the results of a broad multi-media campaign to a company with the recommendation that it be expanded, one of the factors arguing for that expansion was an analysis of the return on the marketing investment (ROMI). The combined press media and digital campaign invited the reader/viewer to an attractive homepage, which both told the advertiser’s story and offered the next step in the journey — registration to receive a free series of ‘content’ publications and videos.
Using the standard media response template, it was easy enough to put costs against each of the site visitors and registrants. For the advertiser’s $60,000, he received 5,300 visitors; and of these, 2,060 people registered to receive the additional content. Although it had been established by the client that the lifetime value of a purchaser would average $250.00, because there was no direct sale of the product (although one could have been promoted with an incentive coupon, etc.), the problem was how to show the advertiser what he had gotten for his money.
To value the campaign, we had to start with the concept that only a percentage of the registrants would be “buyers.” So we built a simple “sensitivities” table, ranging possible conversion percentages and established the sum of all of the costs that would be necessary to effect the conversion, had the client wished to promote a direct conversion. Looking at the number of likely sales from the sensitivities table, even being conservative and saying that only 40 percent or 824 would become buyers, the cost per sale at $54.88 would be acceptable: a lower cost would be better.
There is an old saying that: “The heresy of one age becomes the orthodoxy of the next.” If it were a direct marketing heresy in the past to ascribe any value to the frequency a consumer came in contact with a brand message if this could not be traced to a measurable sale, perhaps we ought to revisit this and, in our new digital age, this might be transformed into orthodoxy. That said, how can we reasonably and fairly determine the added brand value: What price should we put on each head?
Economics teaches that the value of something is what a willing buyer is prepared to pay for it. If the willing buyer is prepared to pay $5 per thousand to send out email messages, then is it really a heresy to say that these communications have a positive value in conveying the brand message — adding to the brand equity — to the analytically selected audience? Note that in the campaign results summary above, we have valued the 20 million brand impressions at $60,000, almost the entire amount the advertiser paid for the campaign. Adding this to the hypothetical $206,000 of revenue earned from sales means that the ROMI is 3.9 times.
I may be a ripe heretical candidate to be barbecued at the stake by my more conservative direct marketing colleagues, but I’ve come to the conclusion that communications which enhance brand equity should be accounted for as such, and that this value must be part of and added to the data-driven marketing equation.
Peter J. Rosenwald is an expat American living and working in Brazil; founder and first CEO of Wunderman Worldwide, International Division of Wunderman agency) and first chairman of Saatchi & Saatchi Direct Worldwide; strategist and senior executive in charge of building subscription and data-driven marketing for Editora Abril, Latin America's leading magazine publisher; founder of Consult Partners, active strategic marketing consultancy working in Brazil, U.S. and U.K. International keynote speaker on data-driven marketing and author of "Accountable Marketing" (Thomson), "Profiting From the Magic of Marketing Metrics" (Direct Marketing IQ), and "GringoView" blog author for Brazilian Huffington Post. With an international perspective, my blog's purpose is to share my maverick views of this business I've spent the last half-century working in, enjoying and observing.