That’s evolved somewhat in recent years, as both agencies and clients recognized that too much emphasis was being put on outputs and not enough on outcomes. Just because you reach a lot of people doesn’t mean that you’ve driven the business forward.
The ROI movement sought to more closely align tactics with business goals. It has been largely successful. So successful, in fact, that most of the important problems have largely been solved. What remains involves computational resources and intergration. Therefore, we are now entering a post-ROI world of innovation, open brands and co-creation.
The Rise of Marketing ROI
The post-war economy was an era of mass media. There was a limited
amount of TV stations and programming was geared to mass audiences.
Advertising pioneers such as David Ogilvy and Leo Burnett
developed powerful brand images that transformed the landscape of
commerce. Great creative work combined with mass audiences evolved
brands into consumer icons.
Then, in the 80’s and 90’s, cable and satellite technology
revoltionized media and fragmented audiences. No longer could you be
sure that your target consumer would see your message no matter how big
the idea was. The central question became “where is our consumer.”
Media buyers became masters of optimizing reach and frequency.
More recently, digital media created a host of new ways to target and
re-target consumers. Google and Facebook showed that advertising was
more than just reaching people with messages, but also driving sales and
getting people to share brand messages. In order to manage all of the
various data, a new industry of advertising technology has arisen.
The chart gives a rough approximation of the
path an ad travels between the time a consumer clicks on a page to the
time that an ad is displayed. It’s really quite amazing when you think
about it. Where we used to think merely in terms of demographic
targeting, now we have a host of targeting methodologies to choose from.
The result has been a lot more flexibility and better outcomes, optimized in real time.
Outcomes, Not Outputs
While all of the technology is impressive, ROI is about a whole lot
more than metrics and KPI’s, it’s about moving the business forward.
That requires more than delivering impressions and clicks, but
understanding specific brand needs. A “one size fits all” approach is
no longer considered efficient.
As I’ve written before, we have entered a post-promotional paradigm. Consequently, path-to-purchase models,
which are basically expanded versions of the chart below, have come
into widespread use and have played an important role in aligning
marketing strategy with brand objectives.
Some brands are well known, but fail at the point of purchase.
Others have strong sales, but consumers are unwilling to recommend them
to their friends. Still others, have a devoted following, but suffer
because most people don’t know about them. Those are very different
problems which require vastly different solutions.
The combination of better technology along with a better
understanding of brand objectives has proved to be a powerful
combination. We are no longer treating all brands the same way and
simply trying to reach as many people as possible, but are efficiently
deploying resources to where they will have maximum impact.
However, for marketing communications professionals, ROI efforts are
becoming a victim of their own success and we will increasingly have to
go beyond ROI in order to produce superior results.
The Curious Case of Logistics
To understand the fate of ROI techniques, it’s instructive to look at another core business function: Logistics.
Wal-Mart, for example, has invested for decades in their logistics
systems, with outstanding results. At the heart of these systems are
algorithms designed around the age-old traveling salesman problem, one of the most difficult conundrums in mathematics. So difficult, in fact, that it has never been fully solved.
However, the perfect doesn’t need to be the enemy of the good and
computer scientists have invented ingenious self organizing techniques
such as genetic and swarm intelligence
algorithms that can closely approximate a solution. The more
processing power you use, the better your answer will be. You can
essentially choose your level of efficiency.
Nowadays, a business get the benefit of the decades of investment in
logistic algorithms by simply calling up UPS and many companies do.
A Question of Competency
Advertising technology is approaching a similar situation. Much of
the work is now done by machine intelligence rather than by humans.
Many of the biggest problems have largely been solved, it’s mostly a
matter of processing power which, by the way, is getting cheaper and
more plentiful all the time.
That’s not to say that there isn’t room for innovation. Natural language processing, for instance, has a lot of untapped potential and companies like Networked Insights and Open Amplify are beginning to harness it. Other areas, like Big Data, are developing quickly and attracting a ton of investment.
However, and this is a crucial point, none of these technologies are
specific to the marketing services industry and, to be honest, the
industry has very little competence in developing advanced techniques.
That means that it’s going to be harder for practitioners to
differentiate themselves based on them.
Competing on the basis of which third party providers you choose is no way to win.
Creating Efficiency and Creating Value
The ROI movement has been enormously successful and will continue to
evolve and advance. However, it doesn’t take much imagination to see
that in the future we will see more and more computational power chasing
fewer and fewer efficiencies. What’s required is a change in emphasis
from creating efficiency to creating value.
Let’s assume it took Edison 1000 tries to invent the lightbulb, how
would we calculate the ROI of the first 999? Does it matter? On what
basis would a corporation evaluate launching the next Pinterest or
Instagram? In much the same way, calculating ROI, as important as it
is, does not create great brands, big ideas do.
And that’s where things really get exciting. Digital technology,
after all, does a whole lot more than calculate things. It allows us to
dream, simulate and experiment. We can choose our scale, evaluate in
real time and run with what works. We can open up our brands and co-create with consumers and partners.
The future of marketing services is to become effective API’s for open brands. In the post-ROI world, the only limit is that of our imaginations.
– Greg
