The Value of Programmatic Advertising: Why KPIs Trump CPMs
The maturing programmatic advertising channel has become a go-to for many brands. But wider adoption of programmatic has led to higher prices, with eMarketer reporting that programmatic ad prices have risen considerably across all major categories (desktop, mobile, apps and video) over the past 12 months. Data providers — both buy- and sell-side — also reported an increase in cost-per-thousand impressions (CPMs) from Q4 2016 to Q4 2017.
The natural reaction may be to focus on the fact that programmatic advertising is becoming more expensive, but rising CPMs illustrate how strong a channel programmatic has become. Advertisers may be spending more on programmatic, but its increasing value greatly justifies the cost on the back end.
Numerous factors influence CPMs today. On the display side, rising CPMs often indicate increased competition or saturation. For performance-based advertisers, CPMs should be the least of their concerns; It’s more critical to focus on the validity and performance of ads. When an advertiser bids more and achieves greater volume while staying within the client’s pre-determined key performance indicators (KPIs), the higher costs become a justified investment.
The Programmatic Piece of the Media Puzzle
Programmatic buying delivers highly relevant ads and efficient results across an ever-expanding variety of ad networks and digital media types, and it may be the most effective vehicle for direct marketers to drive performance through display. When incorporating programmatic ad buying into campaigns, marketers should consider media mix modeling to get a broader view of ROI and better asses how to allocate spend between channels. With the data and insights gained, marketers can better align efforts to strengthen ads and improve the value of returns through programmatic.
To capitalize on programmatic advertising, marketers should manage campaigns based on strategic KPIs, not CPM or cost-per-click (CPC) alone — to achieve the desired outcomes for acceptable costs. Once KPIs are determined, marketing teams can find the best programmatic approach.
Create a Holistic Audience-centric Approach
For any advertising strategy to work, it’s crucial to understand the target audience. Programmatic campaigns provide marketers the ability to work from more than assumptions to identify groups most likely to engage with their ads. Focusing on customer acquisition and how that plays into the overall marketing mix, marketers must consider the various customer attributes (including demographics, interests, behaviors, etc.) programmatic can allow for when serving ads.
Marketers should leverage these behavioral and demographic overlays to create a holistic audience-centric approach across digital channels, guided by target KPIs. The layers of data make audience segmentation more effective, helping identify ideal customers to target and eliminating those who don’t fit a customer profile for a marketer’s product or service.
Effectively Reaching Target Audiences
Since the purchase funnel is rarely linear, marketers must focus on reaching the right consumer at the right time with the right message. Building consumer profiles that continuously track audience interests, purchase behaviors and numerous other interactions can help marketers improve audience quality, refine strategies and adjust messaging to match targets and provide more value. After identifying the right audiences, it’s worthwhile to invest more to reach higher value targets in-market because of the impressive returns delivered, helping to ensure that campaign performance meets or exceeds target KPIs.
Understanding the situations driving interactions in different channels, marketers can deliver the ad format best suited to that setting and audience impulse to increase engagement. For instance, advertising on mobile unlocks countless opportunities to overlay data like location and store hours, enabling marketers to serve relevant and optimized ad creative in real time.
Delivering a strong message to the right audience in the right moment, coupled with content and creative that engages the user, is crucial. By driving creative based on the objective of the ad in relation to KPIs, marketers can look beyond CPMs to more important KPIs that better reflect the success of their campaigns.
Track Performance and Adjust Strategy
Programmatic advertising offers the ability to instantaneously access valuable data on the performance of campaigns and use that information to adjust them in real time. Learning how to track performance and effectively analyze insights helps marketers stay connected with their target audience at various touchpoints and find ways to move prospective customers through the purchase funnel.
Marketers focused on reaching the masses should challenge themselves to improve KPIs on engagement of programmatic ads beyond CPMs. Continuously evaluating platforms and strategies against business goals and KPIs enables teams to stay flexible in testing alternative approaches to maximize programmatic campaigns.
By focusing on the right audience, targeted messages and quality metrics to create effective ads, incorporating programmatic into the overall marketing mix can provide a valuable and scalable asset.
Related story: Understanding and Leveraging Big Data for Audience Insights
Janel Laravie is CEO of Chacka Marketing, a premier digital media agency specializing in paid search engine marketing, social advertising, programmatic display and consulting services.