Think Before You Marketing Metric — We Must Stop Chasing Our ‘Tails’

Not so long ago, in a data-driven marketing seminar I was giving for some Brazilian Microsoft executives, I asked how many of the more than 40 participants “have a subscription”? Fewer than 10 hands were raised. Then I asked: “How many of you have Netflix?” Nearly all of the hands went up.

subscription
“Subscribe,” Creative Common license. | Credit: Flickr by Dominic Smith

Not so long ago, in a data-driven marketing seminar I was giving for some Brazilian Microsoft executives, I asked how many of the more than 40 participants “have a subscription”?

Fewer than 10 hands were raised.

Then I asked: “How many of you have Netflix?” Nearly all of the hands went up, and you could see on their faces the growing wave of recognition: While they hadn’t thought of their Netflix access as a “subscription,” they realized that they had “subscribed” for services to be paid for on a periodic basis, with or without a time commitment. Not a bad definition of a “subscription.” They also realized that not only were their insurance policies, cell phone contracts and utility connections all subscriptions, but Microsoft’s move to the “Cloud” business model was a classic example of subscription marketing.

So why should their software customers have to decide to purchase new versions of the tools when they can receive them automatically, without any new investment, as part of their monthly — yeah — subscription?

Had you measured the penetration of “subscription” possession in our group before that “eureka” moment, the metric would likely have been in the 25 percent range. After a different presentation of the question, however, it would have raised the rate to at least 80 percent. Does it matter? It certainly does.

So much of today’s marketing is driven by greater and greater amounts of data. And those of us whose job it is to plough and harvest this hayfield can be simply overwhelmed by its volume.

In trying to find the haystack needles to accurately inform marketing strategies that should deliver the best results for the lowest cost, we risk missing critical insights. Blame it on too much pressure or too little time; it has the same negative result and we wind up unproductively chasing our tails.

How many times have we heard advertising professionals argue for spending the lion’s share of the budget on TV because “we’ll reach more eyeballs, more often, at less cost per thousand”? It’s the same thinking that drives us to defend the proposition that because email is so cheap, we should broadcast our message with greater and greater frequency, rather than pay the price of quality analytics resulting in fewer eyeballs but the right ones.

Imagine that you are the responsible marketing executive for Pampers. You know that you are going to have to pay for a 30-second national TV spot at approximately $25 per thousand impressions. And let’s assume (an impossible assumption) that 100 percent of your viewers are going to be women. Thanks to Google, we discover that the national average of pregnant women in the U.S. population at any given time is 4 percent. That means that if you reach each of them — another wild assumption is that they are all at least thinking about “disposables” — as well as reaching the additional 8 percent who have kids 0 – 2 years old, as you can see from the diagram, you will be paying $208.33 per thousand — almost 10 times the rate card price to reach your target audience.

Image from Peter Rosenwald for subscription postWithout building a media plan, it is obvious that if you can afford $200-plus per thousand for reach, you have a lot of additional media that might be more efficient and cost-effective than TV spots. Certainly, a single viewing is unlikely to have maximum impact. So that cost of $200 will need to be multiplied by the frequency of broadcast.

What metrics do you use to determine the real commercial value of the marketing spend, the ROMI? How do you gauge whether one medium with a higher CPM will bring you customers with a greater lifetime value than one with a lower CPM? Without a direct and measurable purchase metric, traceable to the specific media spend and message, we’ll never really know for sure. Sadly, that’s the reality.

The metrics specialists will have fancy computers full of PowerPoint slides, defining and dashboarding each step in the customer journey and providing KPIs and benchmarks for clicks, open rates, etc. But in my experience, however, no matter how conscientiously these have been developed, they will have major distortions which are the result of failing, somewhere during the development process, to address basic questions like the meaning of words like “subscription” or “engagement.” The “specialists” will get away with their fantasy solutions more often than not because management tends to look at the big picture, not the details.

Perhaps the best preventive for this is for marketing managements to task their planners to provide not just their “objective” recommendations, but to cook up and serve a smorgasbord of choices and, wherever possible, to reference these choices to solid metrics.

Otherwise, we are likely to spend a great deal of time, effort and money chasing our tails.

Author: Peter J. Rosenwald

Peter J. Rosenwald is an expat American living and working in Brazil; founder and first CEO of Wunderman Worldwide, International Division of Wunderman agency) and first chairman of Saatchi & Saatchi Direct Worldwide; strategist and senior executive in charge of building subscription and data-driven marketing for Editora Abril, Latin America's leading magazine publisher; founder of Consult Partners, active strategic marketing consultancy working in Brazil, U.S. and U.K. International keynote speaker on data-driven marketing and author of "Accountable Marketing" (Thomson), "Profiting From the Magic of Marketing Metrics" (Direct Marketing IQ), and "GringoView" blog author for Brazilian Huffington Post. With an international perspective, my blog's purpose is to share my maverick views of this business I've spent the last half-century working in, enjoying and observing.

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