December 2009 – Online Insights: Online Advertising

Understanding Brand and DR Synergy

Management wants to see immediate results from marketing investments. And why shouldn’t they? Long-term investments in brands are hard to measure, so why not focus on what is measurable and generating strong return now? The problem is that companies that overlook retail branding sacrifice both long-term and short-term margins. Investments in brand campaigns might not get credit for helping the bottom line, but over time those companies that invest brand dollars can see a measurable lift in direct response ROI versus the companies that don’t.

Historically, such contentions have been hard to measure and harder still to leverage in systematic, data-driven ways. With the advent of new tools, new ways to measure and much more rapidly quantifiable media, this is all changing. Not only can we directly assess the financial effect of branding, but we can also make sure that branding campaigns and direct response efforts work together to drive better results for both. And not next year or next quarter, but right now.

Strong Brand Association is Key

How do we know brand investments provide better returns? My company, Rocket Fuel, runs display ad campaigns for a wide variety of retail marketers on our proprietary online ad network. Nearly all are focused on driving immediate and measurable sales. We see these results in real-time, and use them as input into our technology platform to tune the campaigns, better find the right target customers and deliver results.

As we started running these campaigns, we began to see wide variations in success among advertisers.

Companies who have made large investments in building and establishing their brands are seeing great results–often a ten or even 20 times return on their advertising investments. Companies entirely focused on immediate response, without similar brand investment and equity, are seeing much lower returns on similar tactics–as low as two to three times spend, or worse. But they are happy with these results, even though much higher ROI could have been achieved by reaping the benefits of investing in long-term brand value.

Why did some advertisers get great results and others didn’t? Of course there are wide variations in creative, messaging, offers, target, landing pages and consumer interest in products offered. While it’s challenging to hold all these potential variables constant, if you look at enough campaigns, you will start to see a persistent pattern emerge. Retail ad campaigns backed by strong brands tend to perform better than those without strong brand associations. Typically, we see differences of three to five times better performance for strong brands over weaker ones. One top women’s fitness apparel brand achieved 10.3X ROI within a single month: for every dollar they invested they were seeing more than $10 spent in their online store. Similarly, a top brick-and-mortar, high-end fashion retailer achieved over 20X ROI.

We’ve also noticed that this isn’t restricted to strong brands developed solely through traditional offline brand-building efforts–several online-only brands reached their cost per action (CPA) goals at very high volume. For corporate marketers, it seems clear that a marketing investment that makes your direct response spend three to five times more effective would be a worthy one.

It’s All About the Analysis

With the advent of new tools and capabilities online, we can go one step further and not just measure the connections between brand and direct-response advertising, but also use that knowledge to make both campaigns work better. Here’s how it works:

Every marketer is familiar with using test and controls to understand causality between different kinds of tactics, creative and the like. My advice is to use a similar methodology to understand and leverage the connections between brand and response marketing.

First, a marketer needs to run tightly controlled brand and response programs with integrated data and analytics so results can be looked at across the programs. The advent of online technology tools allows for much more rapid feedback and analysis (typically on a daily basis) for both kinds of marketing. The right analytics and data can yield valuable insights, such as helping marketers understand if a consumer who sees a strongly messaged “brand ad” for a major retailer, engaging with themes such as trust, quality and beauty is then more likely to respond to a response-oriented message (i.e. a specific offer or incentive). You can also test and drive better brand engagement by understanding more about the audiences that respond to specific offers.

Take a Holistic Approach

By tightly controlling these kinds of programs, marketers can then start to evaluate how the programs are affecting each other. Coupled with careful analyses of the audiences under evaluation, marketers can start to optimize each program together as one integrated effort. Ideally, marketers should be able to optimize both brand and response campaigns not only to be effective in and of themselves, but also to make the other more effective as well.

In other words, direct marketers can tune brand campaigns to make sure that they drive brand metrics to achieve response-oriented results. And response campaigns can be adjusted so that we learn how to best take advantage of the brand engagement we are driving, and drive more of that as well.

Such an integrated set of programs would create much more value for marketers and their companies. The tools to do all of this exist today, but must be assembled for this purpose. The barriers to transforming your marketing efforts are not technical, but systemic. Too many marketers have brand and response budgets, personnel, objectives, etc. siloed into separate organizations or agencies so that it is nearly impossible to leverage these kinds of synergies. As an industry, we must challenge ourselves to continue to make all marketing accountable. The companies that do this systematically will take marketshare from those who don’t.

Richard Frankel is president of Rocket Fuel, Inc., a hybrid ad network that drives ROI for both brand-oriented and direct-response campaigns. He can be reached at rfrankel@rocketfuelinc.com.