Working at a performance agency, my job put simply, is to generate revenue for our clients. So it’s probably no surprise that we use revenue-based metrics such as Return on Investment, Cost per Action and Return on Ad Spend to define performance. These metrics allow us to calculate and understand the success of our campaigns. When we plan and forecast, we do so in fixed time periods; typically weeks and months, and we set our targets based on the business’s needs.
I completely understand the need for targets; businesses need to be profitable and people need to be held accountable for performance. But revenue based targets set over fixed, short term time periods have side-effects.
Short term targets lead to poor decisions
We continually analyse and benchmark each piece of marketing activity on whether targets are being met. We analyse in great detail, on a daily or weekly basis, what’s ‘working’ and what isn’t, allowing us to optimise and improve performance. Typically, if we spot something that isn’t hitting our target, we make a call on whether to test and improve, or to move that budget into other activity.
Inevitably, the behaviour of analysing over short time periods and looking at revenue-based metrics, results in the same outcome every time; focusing on tactics that return a profit instantly. Instant profit is what every marketer dreams of, but in the world of digital marketing, this tends to limit us to tactics that favour the end of the purchase journey, such as paid search or remarketing. This also tends to be the easiest activity to track and attribute, which further feeds our views on it being the most lucrative. However, it limits us to targeting users who are actively showing intent and are in-market for your product or service right now.
Naturally, all marketers have rushed to the same place to target these in-market audiences, through paid search and social platforms. The continual year on year revenue growth by the giants of Google and Facebook are testament to the billions of pounds in marketing budget that are being placed here. Over recent years, brands have piled more and more of their budget into bottom of the funnel activity, turning off the less attributable, broader targeted, brand building activity such as TV.
The battle at the bottom of the funnel
The truth about tactics such as paid search and paid social, is that they’re more expensive than you might think! Firstly, if we study the mechanics of how these platforms operate, they trade on an auction basis; and the highest bid wins. As a brand marketing on these platforms and bidding against your competitors, you’ll find that over time, your profit margin will eventually be eroded. While there is a profit margin, brands can afford to outbid each other, fighting to maintain position in the search results, or in a user’s timeline until slowly, competitors are priced out.
That’s why recent trends show the cost of a paid search click rising at five times the rate of inflation. This is a battlefield, and it’s only getting harder.
But the real cost to brands is that, while focusing more and more energy in this space, we’re forgetting to invest in how our brands are perceived, remembered and valued by our potential customers. Performance has been mistaken for quick returns, instead of long term growth and the value of the brand is being diminished.
A change in behaviour is needed for peak performance
While all of this continues to distract us, the basic truths of marketing stay the same. Countless studies by the likes of Binet and Field have shown that emotion-led brand building activity will result in a greater return on investment over long periods, when compared to the short-term return of direct response campaigns.
But when benchmarked against the wrong targets and put under pressure to make quick returns, tactics that deliver long term performance are off the table. Marketers will cut any activity that isn’t helping them hit their target, before it has a chance to deliver.
This isn’t anything new, but if marketers want to grow successful brands over time, it requires a change in behaviour. If your marketing activity is benchmarked on weekly and monthly targets, and your reporting structure puts pressure on you to deliver instant results, you’re heading for a challenging future.
At RocketMill we understand this challenge, which is why we work with clients to deliver our Total Performance strategy; a marriage of the short and long term that aims to deliver performance in both. When audiences are not actively in-market, we can serve them an emotional brand building experience and when they become active and have signalled an intent to purchase, we can serve them more rational communications that give them reasons to buy.
Doing this well might require you to hold your nerve, and ask the difficult questions, but if your brand is going to stand the test of time, it’s a necessity.