Technology takes bull out of marketing costs

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At the turn of the century, John Wanamaker, the father of advertising, bemoaned his marketing costs thus: “Half the money I spend on advertising is wasted – the trouble is, I don’t know which half.”

But 21st century senior executives are casting a baleful eye on these costs – and are turning to technology for concrete metrics to make marketing accountable.

“Businesses have screwed down spend in almost every other area, but then when you get to marketing, the marketing guy says, look at how great our creative stuff is,” says Jeff Levitan, general manager of Veridiem, a marketing analytics firm based in Middleton, Mass. that was recently acquired by SAS.

Without measuring return on investment (ROI), there is no way of knowing if all that creative marketing works or doesn’t, he says. And senior executives are increasingly impatient with pleas that marketing is an art, not a science.

As in other areas where business intelligence is making inroads, there is a clash between the old school and new. “Old age marketers like photo shoots and they believe in their intuition,” says Levitan. “But new age marketers believe their job is allocating assets in order to achieve desired business results, such as increasing revenue or customer retention. These are more likely to use technology to do that effectively.”

Marketing programs have grown extremely complex over the years. There are different types of products, customer segments, demographics, channels and a fragmented media landscape to consider, says Levitan. Marketing models have a complex range of data inputs to track: econometric, geographic, points of distribution, and marketing spend in varied media such as Web, print and television.

Veridiem’s analytics sniff out the trends and patterns in this chaotic data to allow marketers to optimize spend in volatile markets. “You need a system that lets you take in new data as the environment changes, and adjust your existing marketing model or create a new one if changes are significant. It’s difficult to do that in a timely and systematic manner without software,” says Levitan.

Television is an area where the old, gut-feel approach to advertising may be misguided. “In most cases, it’s the first place we go look for opportunities,” says Levitan. “The trend is to evolve away from mass marketing to more targeted media campaigns.”

Television has its place, he says, but many industries should rethink their priorities. “The auto industry, for example, is in crisis. But many companies are still spending far beyond the point of diminishing returns on television ads.”

People shopping for big ticket items such as a car are unlikely to be swayed by pretty ads these days, as they are increasingly turning to the Web for hard information about price and performance. About 70 per cent of consumers use the Web for research before purchasing a car. “The issue here is what tactics should be used to reach them?” says Levitan. “Are companies looking to create an educated sales process or just dropping banner ads?”

In many ways, the decline in television as a marketing medium is occurring before the next one, the Web, is really ready for prime time. Online shoppers and marketers are still fiddling with the dials to figure out how the medium works. But there are already some marketing misconceptions in this area, according to recent eye-tracking studies.

Banner ads, for example, are largely ignored by users. “People don’t even look at them. They tune them out of their peripheral vision,” says Kara Pernice Coyne, director of research at the Nielsen Norman Group, a usability research firm based in Fremont, Calif. Ads with complex graphics fared the worst. “Banner ads that users have to study to figure out the product are not worth the money people are spending.”

People are also learning to tune out animated ads. The motion may distract users and cause them to glance at them, says Coyne. But once they see it isn’t something that interests them, they are annoyed. “Users treat them as a hindrance to their productivity,” says Coyne. People find pop-up ads more than merely annoying. “Contempt is the right word for that. They make people angry.”

Coyne points out that the results of the study would likely have been different five years ago. “People are evolving visually. We’ve trained ourselves to tune out junk. At the beginning, users did click on ads, but now they know better.”

Unlike a passive medium like television, people searching the Web are task-oriented, and tend to ignore irrelevant or complicated information. Simpler designs work best, which may go against the way marketing traditionally approaches creative elements, opting for elaborate or jarring images to attract attention. “But simple elegance is also difficult to do – you can still wind up spending a lot of money on that,” says Coyne.

Most effective are simple text box ads, largely because they’re often relevant to users’ research. “These get a few more looks. So long as Web developers continue to use sponsored links related to content, it’s effective,” she says.

In 2001, Google’s pay per click Adwords service introduced the idea of search engine ads that worked with, rather than against, users’ online purposes. In November 2005, the company introduced a new Web analytics offering to complement Adwords. The service allows business to correlate clicks to revenue.

“There’s a cost to businesses every time a user clicks on an ad,” says Brett Crosby, senior product manager at Google’s Mountain View, Calif. Office. The service must be activated by adding code that tracks users’ movements anonymously, via a cookie, to compute the ROI. “If an ad costs $1 and one in 100 clicks result in a sale, with the ROI calculation we provide, marketing people can compare what they get in return.”

Google also offers features that can give television ads new and trackable life on the Web. In the past, marketers had no way of knowing if people were actually watching commercials on television – but paid big bucks for time slots that supposedly reached target numbers. But Google can track user movements within flash or online video, so gauging their effectiveness is now possible online. “We can see when people pause or cut out or put tags in the file,” says Crosby.

Many commercials deemed too risqu

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