If there was a “crisis” in marketing effectiveness, it is now over

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In Doctor Who, House or 24, each episode is a story, but the characters are also part of a larger plot. The things that happen each week turn into ups and downs: questions, conclusions and journeys.

Effective marketing is like that too. Every marketing team, every creative vehicle, every media plan has a story, but there is also a larger story. It’s about whether we generally make better choices than before. And whether the new things we tried collectively helped or not.

The big story that our industry has been telling itself over the past few years is that there’s a crisis of efficiency, that our ability to sell stuff using ads is on the decline.

This is really not a good message in terms of public relations. This is useful if there is a problem and we need to correct the course. But if it doesn’t, it’s a message that undermines marketers’ ability to do their job. It’s already easy for CFOs to wonder if marketing is worth it and divert the budget to other things. The simple message that marketing works bears repeating. We complicate takeout at our peril.

And now there is new data that adds a chapter to what we know. This suggests that if there ever was a general efficiency crisis, it is now over. Return on investment has increased over the past five years and is now at levels comparable to 2005.

The big ups and downs

The evidence on these questions will never be perfect, but in 2021 there was a big step forward. A group of analytics firms – D2D, IRI, OMG, VCCP media and magic numbers – have agreed to share anonymised data on UK advertising which they have assessed using econometrics.

This fitted into a database that was much larger than others like this one that had come before it. And for once, there weren’t just winners. It was named ARC for the ad research community that came together to build it.

The data suggests that currently there is no crisis. The average return on investment in recent years – among mainstream non-award winning campaigns – is £3.80 revenue for every £1 spent on advertising. And the efficiency is not declining.

The graph above shows the data. It’s a simple chart, but each bar contains the results of 44 to 139 econometric studies, each including three years of properly rated advertising experience. And ROIs have been adjusted for the size of advertisers included, to ensure sample composition doesn’t drive results.

What it shows is that return on investment declined between 2005 and the most recent data, and was particularly weak the year of the Brexit vote. But since then advertising’s return to the UK has increased, and in 2019 it’s back to at least where it was in 2005.

Marketers are in pole position to shape consumer demand for sustainability

Learn by doing in online advertising

The data also contains clues as to why advertising returns have changed. This suggests that efficiency has been evolving as marketers, agencies and platforms, and their search providers, have experimented with new online media channels.

What has happened is that more and more sophisticated online options and formats have been made available to advertisers. Over time, we learned. We now know a lot more about which to use, when, and how to get the most out of each.

It is probably this evolution towards a more mature use of online media that the table below explains. In the long period between 2005 and 2016, marketers haven’t always been good at using the internet. So as the share of online budget increased, efficiency decreased. But after 2016, people used the new tools more successfully and continued to learn, the ROI recovered and continued to increase.

Online experimentation is visible in the choice of media channels in the new data, plotted in the two graphs below. In offline, budget allocations have been stable, with about two-thirds of the budget going to TV and the rest split among other offline channels over all years.

But online, advertisers have tried things, learned, and found a better fit. The biggest change was the decreasing share allocated to display. But during the period when ROI was increasing, there was also experimentation with paid search, which grew rapidly before falling back a bit. And in 2019, the year with the highest return on investment, paid social networks had also grown to sit alongside search as the most important online channel.

Marketers who have lived in these charts over the years remember these changes and more. We used to decide which site our banner ad would be displayed on, now we choose which audience should see it. Before we just existed on Google, now we optimize for the best keywords. We used to target organic subscribers, now we know that’s often preaching to the choir. We didn’t know about bots, now we do. The list could go on even longer.

The false and the true of marketing effectiveness

Online will continue to be the protagonist

So, just like the best characters in a long-running series, more online advertising isn’t “good” or “bad.”

It’s imperfect, and we haven’t always had a good experience with it. But he’s come a long way in the years we’ve known him, and he’s in a better place now.
And he is likely to continue to be the protagonist. The changing landscape of advertising effectiveness continues to shift in favor of the web. The pandemic has changed the minds of many people who were not comfortable with making decisions online. And, slowly but surely, the reach of offline channels is eroding.

But there is no definitive answer yet on the best way to use online. The media mix chart above is far from settled and marketers and their research partners are still experimenting. This means there is room for more learning-by-doing of the kind that has helped increase efficiency over the past five years.

It is therefore time to move away from the narrative of the crisis. History is now in a much more optimistic phase.

Sara H. Byrd