How We Think about ROI Needs to Evolve

The growth of digital media continues to “surprise” some, including executives at large agency and media organizations. According to a new forecast from WPP’s GroupM, digital is the top (and perhaps only) driver of ad growth globally. And it continues to steal dollars from other media — even TV.

What’s actually surprising in the Ad Age article linked above is a kind of underlying TV bias, reflecting a siloed view of media which is still pervasive. There remain many proponents of one medium or channel over another. Yet studies repeatedly point to a consumer purchase path that is now decidedly multi-channel.

The discussion is shifting from “this medium vs. that medium” to “this media mix vs. that media mix.” In other words, marketers are thinking more broadly about how media together impact consumer behavior.

Traditional media (TV, radio, newspapers, etc.) always relied on the concept of “reach,” where the biggest spenders could address the largest audiences with the least effort. Digital media has attracted ad dollars from traditional media by offering a “better ROI.” However digital media and related ROI thinking may be too narrow.

The most revolutionary aspect of digital media is the power it delivers to consumers. Especially with mobile devices, they now have continuous access to content and information. Given this shift, any attention or consideration delivered by marketing or promotional efforts might be considered effective.

While digital media have always promoted greater “accountability” or “transparency,” it remains difficult to determine which channels or promotions actually motivated consumer buying. Multiple sources on multiple devices makes it difficult to attribute offline sales to any specific advertising or marketing campaign or medium. Despite the advances with location data, it remains easier to prove ROI with online purchases, still a small fraction of all retail buying (<10%).

Given the range of platforms and channels, it’s difficult to say conclusively “this ad resulted in this action.” When there were only a few media to choose from, it was somewhat easier to draw such conclusions, even if there was less specific data. Today’s media landscape is so broad, complex and diverse that understanding the “why” of consumer behavior and motivations is as elusive as ever, perhaps more elusive today.

Despite these challenges, large and small businesses alike understand that advertising and marketing are critical to increasing awareness and consideration, growing business and retaining customers. Anecdotal information is probably as much of a driver of the growth of digital as the data. And it continues to grow in the face of real challenges (i.e., fraud, ad blocking, viewability, etc.).

While new tools and technology offer more insights into consumer behavior, they are usually tied to some particular ad or campaign, not full range of media used by advertisers. (Multi-touch attribution has problems too.) Measuring how a variety of media complement each other and motivate buying remains difficult to determine.

Marketing and advertising across a variety of media can and probably should never be judged strictly on the basis of “ROI” – at least narrow conceptions of ROI. Given the complexity of consumer behavior, paying for awareness and exposure (without a clear ROI) is simply a cost of doing business. This isn’t to suggest that new tech and solutions won’t improve ROI calculations. It’s just to say that we should avoid looking at all media in terms of narrow, direct response thinking.

What is needed is a more holistic view of ROI and perspective on how a range of factors – reach, visits, impressions, clicks, shares, store visits, mentions, sales, etc. – inform the consumer path to purchase, rather than focusing on isolated channels or campaigns that may have come immediately before the purchase.

How is your business re-imagining the traditional notion of ROI?

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