Commentary

Taking Measure: Supplying the Demand

Taking Measure: Supplying the DemandWhen ValueClick announced its second-quarter earnings and lowered revenue estimates for the balance of the year, it blamed the weak economy and speculated that other online media companies will soon do the same. With performance-oriented media (search marketing, and cost per action) suffering less than brand-oriented media (branded publisher-based display), they are probably right, and that is a shame.

Performance marketing is a wonderful thing. When done correctly, it's the ultimate safe investment. You only spend up to the limit of a demonstrated economic return, and the response is measurable and immediate. It works because it targets the very bottom of the conversion funnel (those consumers who are ready to buy) and helps to "close the deal." In search, the consumer self-selects by clicking on the ad word. In performance-oriented display, inexpensive network inventory supports a constant presence, so when the consumer is ready to buy, the brand is already in front of him. The problem is neither of these cost-effective, worthwhile tactics actually create or increase consumer demand; they simply harvest it. And in a down economy, marketers have to increase their demand-creation efforts.

Few marketers have mastered the art of online demand creation. Typically, marketers and agencies still view traditional media (particularly TV) as the workhorse that delivers mass reach, builds awareness and lays down the brand points that create consumer preference. Online has played a supporting role in these upper-funnel tasks. But this is changing. Marketers such as University of Phoenix and classmates.com have successfully built their brands primarily online, and even venerable marketer ibm has shifted the majority of its demand-creation spend to online. But most marketers and agencies have not understood how to follow. Here are four tactics that can help:

Understand (and document) your purchase funnel. Sounds obvious, right? But does every member of your team really understand how consumers move through the process? Is the process the same for all consumers, or is the funnel different for different segments? Can the process be accelerated? Is it mediated by triggers or life-stage events? At each point, how are consumers using the Internet? Marketers cannot be satisfied with flimsy research or limited insight. They should be able to answer these questions with a detailed model of consumer demand that is communicated to staff and agency.

At each stage of the purchase funnel, define target audience segments based on a combination of demographics, psychographics and Web behavior. Sometimes it requires advanced modeling approaches to understand clusters of characteristics that relate to behavior. Regression models, discriminate analysis and clustering algorithms can tease apart distinct and targetable audiences. But be careful: Not all audiences have the same economic potential, so be sure media planners determine how much to pay for each.

Plan media and creative together. With a detailed understanding of segments in each funnel stage, media planners and creatives have a wonderful opportunity to work together more closely. Creatives will appreciate the chance to create laser-sharp messages against well-defined consumer needs. Media planners will enjoy the creative process of highlighting contextual opportunities and developing custom placements. Campaigns can be designed with sequential messaging that takes advantage of new media technologies. You'll get better work and a more engaged team overall.

Define success metrics for each target audience at each phase of the funnel. Look at audience composition and reach as the key metric at funnel entry. Look at engagement metrics for the consideration phase. Evaluate the profiles of engaged consumers against past purchasers. Is the campaign engaging each of the target audiences as expected? Most important, whatever the metrics, have a plan to track and optimize against them so campaigns can be tweaked mid-flight.

Using this approach, marketers will find their performance numbers going up, and their cost-per-acquisition numbers appearing to go down (based on last click or last view). More consumers will be dropped into the top of the purchase funnel and more of them will be pulled through to sale - a pretty good outcome in any economy.

John Nardone is CEO of [X+1]. (jnardone@xplusone.com)

Next story loading loading..