ROI is the favorite metric for Finance, the least favorite metric for Marketing, and an obsession for some people in Marketing Research. Without downgrading the role ROI or media efficiency plays, I am making the case here about the bigger role effectiveness has in the brand growth trajectory.
Similar to a table game at a casino, a positive ROI is the minimum entry requirement to play in the advertising game. Yet too often, we think ROI is enough to end the measurement conversation. Take the example of the “cheapest media in the world” standard banner display. Yes, the one everyone decides to ignore or block all the time. Display Banners are so cheap that sometimes, by converting a ridiculously small number of consumers to purchase your brand, it yields a break-even ROI. Compare that with the highest quality online video available: it’s really expensive but converts 10x more consumers compared to the display banner. But if it’s simply 10x more expensive, it yields the same ROI. Which would do you choose? For me, the largest conversion, or sales impact, will always win. Just because a higher conversion will accelerate the growth of your brand faster. You could theoretically grow your brand with display too, but it might take you at best 10x the time to achieve that impact. And more risk along the way. Let’s not get into ad-fraud, ad-blocking, erroneous clicks, and more.
ROI is a reflection of both your creative asset and your media cost. During the last two months – in COVID times, as some advertisers stopped digital investment, we saw significant shifts in CPM decline, on major digital platforms. The shifts caused artificially improved the ROIs. Are the consumers responding differently to your advertising? Probably not. Is ROI simply changing because of market conditions beyond your control? Probably. That’s why I think looking at effectiveness first is a more consumer-centric approach.
At Mars, the consistent fixation with generating a higher sales uplift is what enables longer-term strategies of growth for small brands. When your brand scale is too small to even dream of a positive ROI short term, the only path forward is to maximize conversion. With time, you will command a higher ROI if the sales uplift standard remains high. Looking at only ROI, it could be seen as irresponsible to invest in smaller brands with a great future outlook, and Finance will sweep the table.