A healthy marketing budget can be powerful fuel for brand expansion and sales growth. But when sales improve, most marketers need to prove that their activity was the driver of sales lift. Marketers must tie their tactics directly to sales outcomes in a way that’s as simple and believable as possible.
Black Boxes Don’t Help
Executives outside of Marketing must believe with their minds and their guts that Marketing is driving sales
When marketers look to implement multitouch attribution (MTA) models, they try to capture all activities and assign partial credit using complex forecasting and modeling techniques that are above the heads of those without a PhD.
With a median CMO tenure of just 31 months (and just 27.5 months at top consumer brands), it’s obvious that something needs to change in order to restore trust in marketing professionals and their spending.
There’s an alternative to MTA, and it ties marketing activity directly to sales outcomes. Closed-loop measurement (CLM) uses simple math. By comparing the change in sales of a group exposed to marketing to a control group, you can determine the sales lift generated by the specific marketing activity in question.
MTA, despite its increased complexity, cannot measure incrementality. That’s one of the reasons Forrester says MTA is in the “trough of disillusionment.” Never mind the six-month IT project required to get the system up and running.
Tying Spend to Sales
Keep things simple by measuring sales lift, and you’ll know what spending works and where to reinvest. When you know what works, your decision-making process becomes much easier, you generate better business outcomes, and you look good doing it.
Follow the following four steps, and you’ll see why closed-loop measurement can be a marketer’s best friend.
1. Speak the language of business leaders
I once heard a colleague tell our business unit president that marketing had driven an 8% increase in leads over the previous year. The exec refused to believe it because sales had declined 2% over that same timeframe. Never mind that both could be true. The exec lost trust in my colleague, who had to work hard to regain it.
To the leaders of your company, leads, impressions, and clicks don’t mean a thing. They’re after sales. Tie your programs to sales impact, and avoid credibility issues.
The first step to take when closing the loop to sales data is to determine the largest, most reliable source of sales data available for your business that can be tied back to individual campaign impressions. Point-of-sale data typically falls short. Good sources to consider are direct sales via e-commerce, loyalty card data, private label credit card data, e-receipts, branded card data, and data from your payment processor that usually covers all types of credit cards.
2. Separate the signal from the noise
There’s plenty of fraudulent activity in the digital advertising world. Bots can still drive up your clickthrough rate, but they don’t buy the products in the advertisements they click on. In fact, a study from Imperva Incapsula found that fraudulent bot clicks cost businesses $7 billion each year. It’s never been clearer that clicks do not equal sales.
By measuring sales lift, you cut out the noise and get trustworthy results that you can confidently share with other departments.
3. Compare results across platforms
By measuring the sales impact generated from individual marketing activities vs. a control group, you have a common yardstick for measuring your results. Compare marketing activity across media, platforms, or suppliers, and optimize your dollars. To ensure the greatest accuracy, regularly create new control groups to account for seasonal changes and other fluctuations.
Businesses vary in how they choose to create control groups. Randomly assigning potential ad targets to an exposed group or a holdout control group is the gold standard, but few companies want to pay for the added cost of serving public service announcements to their holdout groups. It’s much more common to generate some kind of lookalike control group from consumers that didn’t see the advertisement.
The first key to success is ensuring that a consumer assigned to a control group provides a logically good comparison for the people in the exposed group. For instance, if your brand target is families with kids in the Northeast, those same types of people should be in your control groups.
The second key is the measurement tool being used. It should have a way to verify and adjust for instances when the control group fell short. Even good plans sometimes go awry. It’s important to be able to tell whether the amount of money spent with your brand is the same in the exposed and control groups before the advertising ran.
4. What’s old is new again
When I started my career in marketing, test vs. control methods were time-consuming. I had to air ads in one market and find a similar market to compare it to. Running multiple experiments at once was difficult, if not impossible. With the advent of people-based marketing and measurement, it’s possible to isolate people who have been exposed to one ad from another group shown a different ad. Throw in a control group that’s seen neither, and you have the ingredients for an effective closed-loop measurement that compares two different alternatives with each other and the control.
* * *
Marketers have more data than ever before, but they’re losing sight of the forest because of all the trees. MTA is the trees. Nonincremental trees. Comparatively, closed-loop measurements are a more reliable way to tie marketing activities to their impact on your business’s top line.