by John Wallace
June 23, 2023
Last week, I used a marketing term in my blog post - Marketing Effectiveness. It might sound a bit general and vague, so it's worth taking a few minutes to understand why we are using it and what we mean by it. We are at a point where we need to reimagine measurement and look at how marketing spend is directly involved in growing revenue and profit in an actionable and defensible way.
As someone who has spent their career measuring things, including campaigns, product recalls, credit card transactions, and caller sentiment in call centers, I have fine-tuned my beliefs on measuring marketing for brands like Williams-Sonoma, Visa, and Apple. In 2013, at DataSong, we discovered a superior methodology by bringing incrementality to multi-touch attribution, which drove adoption from the C-Suite to channel-level spend execution. Our numbers drove the performance review and planning for multi-billion-dollar brands, and our customers had a trustworthy understanding of marketing performance.
We soon realized we answered the wrong question: "How did my media perform?" While interesting, this measurement-driven approach left many questions unanswered for brands wanting to use data to grow revenue and profit. These more challenging questions include:
What performance might I have achieved at different spending levels?
How should I spend next week?
What happens if I'm running a promotion or it's a holiday?
How do I trust that any of this is correct?
Today, when making critical media spend decisions, many brands are stuck with conflicting signals from measurement approaches they don't trust. Tools like last-touch measurement, multi-touch attribution (MTA), vendor-attributed revenue, incrementality testing, and ad-hoc solutions in spreadsheets come up short. To some degree, each of these approaches shares common flaws:
They are not trusted for their ability to holistically connect spend to revenue with a full-funnel view across the media plan.
They lack predictive power - they are not designed to tell you what to spend next week. You can't re-spend last week's budget.
They involve lagging indicators of last quarter's or last month's performance that are not actionable or timely in a way that can influence spend decisions needed next week.
At LiftLab, we have been working with a wide range of customers, big and small, who sell different products and use different media strategies. Their shared common desire is to improve the ROI of their media investments. Many of our early adopters were burn victims of various measurement approaches. In the smaller brands, they had either failed with MTA or heard enough horror stories not to bother. Some of the larger brands had enjoyed success with large-scale MMM solutions, but the digital community was underserved, and new business initiatives only got rear-view treatment. Across the board, spend planning during holiday periods seemed like voodoo math. These customers share the same goal - they want marketing to be more effective. They are looking for more revenue and more profit.
Enter Marketing Effectiveness - Trust, Future-facing, and Agility
Marketing Effectiveness delivers a data-driven approach to improving the overall performance of media investments. It goes beyond measuring how you did. It's designed from the ground up to grow future revenue and profit. The key building blocks for Marketing Effectiveness include:
Incrementality - A granular understanding of current marketing performance
Elasticity - A clear picture of the potential performance at differing spend levels
Experimentation - An integrated testing approach to verify model results and explore spend options
Prediction - techniques that look into the future with available data to suggest optimized spend levels for all or part of the media plan.
Real-time - an agile, timely way to support a dynamic, fluid budgeting approach to marketing.
Unfortunately, traditional measurement and experimentation approaches don't get us there. Yes, measurement is one piece of this puzzle. However, even here, innovation is needed. Measurement vendors have had a myopic focus on the technique du jour (counting clicks, MTA, MMM, Machine Learning, incrementality testing, anyone up for some Bayesian?). Each vendor clings to and defends their singular approach. This confuses buyers and misses much larger points.
First, trust is essential, and more data leads to better outcomes. Our customers can verify model results by combining experimentation with economic models and quickly explore new strategies. They have data performance they can trust.
Second, we focus the analytics on the problem that matters most - making more money. With a trusted understanding of performance, our clients have the predictive capabilities to direct future spend - at an exceptionally focused level by media type, channel, tactic, or campaign.
Third, they don't have time to wait for a model to catch up to their exploration of new channel opportunities. They need to test new strategies quickly. They must always understand the implications of peak season, holiday periods, promotions, and spending plans.
This combination of trust, future-facing and agile capabilities is a game-changer for our customers. The most significant aspect of Marketing Effectiveness is its focus on growing revenue and profit. At the end of the day, getting more of your money in the right places is a proven strategy for success. That's the goal of Marketing Effectiveness.
We will cover how we do this in the coming weeks. In the meantime, read how Thrive uses LiftLab to drive next week's spend. Feel free to reach out for a deep dive and to schedule a demo. We would be happy to take you through it.