Advertising guru Sir Martin Sorrel talked about the 'four grey swans' affecting the global economy when he released WPPs quarterly figures last week.
Grey swans being known issues and black swans being unknown, unpredictable events. It was Rumsfeld-esque.
If we zoom into our own world there is a long list of things for marketers to be thinking about in a digital world which is changing more rapidly now than at any time in the last ten years.
But for me there is one big 'grey swan' - and that is how we measure value.
Despite the modern challenges of big data and a proliferation of technologies, marketing remains a very simple beast at heart. One of the things I talk a lot about is 'media optimisation', the process of making budgets work harder, not just in paid media but across paid, owned and earned.
And there is always one starting point. There is always one thing that I think every marketer should worry about more than anything else - measuring value.
What do we mean by measuring value? Of course you already 'measure value' in some way by tracking spend versus a wide range of metrics like impressions, clicks, leads or sales. But one of the biggest opportunities to uplift performance is by being better at measuring value.
That means thinking about all the valuable events that a customer could perform (not just a sale) and all the things that contributed to that event happening.
Of course there are some things we can track and many things we can't track but being better at measuring value means moving your business closer towards what is technically possible. By doing so you will spend more of your marketing budget on what is really valuable and less on what isn't.
So here are five questions which might help you work out where you could be better at measuring value:
1. Are you measuring real and relative value?
What is a 'conversion' for your business? How closely does that match how you really make money? For example, if you are a credit card company and you measure your media to a cost -per –application then clearly that is not aligned to how you make money.
Many applications are instantly rejected or referred for further evaluation. Even if you only count accepted applications that acquired customer will only start to make the business money at the end of the 'free' balance transfer period or if they go on to buy other products.
Is this 'real value' data being fed back into your marketing?
Most traffic to a website doesn't convert. Are all the people who visited your website and did not buy worth the same? Of course not. Some are close to buying and others are not planning to buy at all. Lots of people could be in between.
To account for this are you measuring the other valuable interactions outside the hard conversion event? Someone who spends more time on your site or looked at certain pages might be relatively more valuable than someone who didn't.
A user who viewed the store locator could be about to visit your shop and buy offline. Did the user make a phone call or download a brochure or watch a video or simply not bounce on the home page? You don't have to know the real monetary value of all these interactions but its worth thinking carefully about their relative value.
2. Do you have a single view?
By single view I mean a single cookie view rather than a single customer view. There's a distinction. The modern customer journey for many brands is non-linear and complex, it's across multiple devices, it's online and its offline, the real influences are many, so it's good to start off with what we can do.
Focusing on cookies as a proxy for people isn't perfect of course but it's much better than tracking some channels through analytics, some channels through your ad server and some using completely isolated systems and data sets.
Bearing in mind most advertisers use a last click attribution model, getting a single cookie view of the online user journey including 'organic' touch points like SEO is a step in the right direction.
3. Have you closed off the big data leaks?
Where are the leaks? How much of a difference might that missing data make? Could it be the difference between a piece of media being positive or negative in terms of ROI?
Online to call centre is certainly a loop you must tie up with call tracking software if your business drives significant revenue through its call centre.
There are different levels of call tracking depending on the integration and the software being used but first base is knowing the channel mix that delivered the call as a 'conversion event' (from which you can apply an average call centre conversion rate for a rough approximation) or better still, track the real value of that sale by passing the revenue and margin data back through the software.
Research Online Purchase Offline (ROPO) measurement is more of challenge but it's about steps towards understanding value in areas like this rather than a final solution.
4. Do you 'share the love' in your attribution model?
Once you have moved your metrics closer towards how the business really makes money you might want to think about how you share the value of that 'conversion event' between all the touchpoints that contributed towards it. This is attribution.
Of course, if most of your conversions happen in one touch point then attribution is never something you need to worry about! If that's not the case then remember that attribution can mean many things. Cross device, across online channels and ROPO for example.
The first one and the last one are a major challenge. The middle one is easier and should be your first step away from a last click model once you have your single cookie view in place.
In terms of attribution across the online user journey think about the value of each touchpoint. Is the touchpoint active or passive (i.e is there engagement like a 'click' which means it's 'active' or it is something like a 'view' which is 'passive').
Thinking about search touchpoints, do you attribute brand in a different way to generic bearing in mind brand is largely navigational? Is the touchpoint the first, the last or somewhere in the middle? Is it recent or less recent?
Just as in the first point the right attribution model simply considers the relative value of these touchpoints and shares the credit for the 'conversion' accordingly.
5. Can you act on what you know?
Finally think about application. Measuring value more intelligently requires active application rather than passive analytics. Unless you can apply all of the above to move your media spend towards the areas that are driving real value then what's the point?
Ideally the platform you use to deliver your single view and your attribution model should be the platform that is managing your media and as programmatic buying becomes more prevalent this connection will be increasingly important. Sucess in biddable media is entirely based on an accurate calculation of value in the auction.
So is measuring value the 'grey swan' of marketing? I'd love to hear your views and I hope some of these questions are helpful in forming your plans for 2013.
I firmly believe that the closer your measurement to your reality in terms of value, the better your marketing will perform. And with Sir Martins 'four grey swans' looming over us all that has to be a good thing!
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