Business & Finance Advertising & sales & Marketing

Remembering the "I" in ROI

Though conventional wisdom counsels otherwise, it's time to argue with some customers.
For ad agencies, that's advertisers-who haven't lately always been right.
Many have gutted their ad budgets, reacting to our troubled economy with caution and fear, rather than creativity and foresight.
Advertising was down double digits in 2009, following a 2.
5 percent drop the year before.
Many big brand CFOs have slashed traditional ad spends to "cut costs" and "save jobs"-their own being first on the list.
When they do advertise, they're turning increasingly to direct response tactics.
According to a Direct Marketing Association report last year, over half of the U.
S.
ad spend is now devoted to direct marketing.
Why? ROI.
Numerous top management and marketing execs have grasped what many of us have advocated for years.
If your goal is more sales-and if you want positive assurance that your advertising promotes that primary goal-there's no substitute for measuring results.
If every dollar you spend on DRTV media returns two to three dollars in direct sales-while simultaneously boosting brand recognition and retail sales-that investment has clearly paid off.
As word of these tactics' success has grown louder, ROI advocates are no longer mere whisperers in the marketing wilderness.
You can't read an advertising blog, listen to a client pitch, or read any worthwhile marketing magazine without tripping on the term a few dozen times easy.
Search for "ROI," and Google returns over 99 million hits.
Google News returns over 16 thousand from just the previous two weeks.
To DR professionals, this should be welcome news.
But "ROI" is becoming so ubiquitous that it risks losing the specific meaning that makes it a useful construct.
Curiously, despite the phrase's popularity, many advertisers have forgotten what the "I" actually stands for.
Wiktionary defines investment as: "a placement of capital in expectation of deriving income or profit from its use.
" Replace "capital" with "promotional messaging," and that's pretty much the definition of advertising.
In fact, replace "investment" with "advertising," and the definition still works.
Advertising is investment.
If it wasn't, it would have little purpose.
Companies must recognize that when they reign in their advertising, they essentially stop investing in themselves.
Do you have to spend money to make money? Yes, actually, you do.
Even an eight-year old with a lemonade stand knows you have to buy not just lemons, but some poster board for your sign.
Investing is inherent to business.
Brands that have shifted dollars to direct response measurements to calculate ROI realize this.
But those gashing ad budgets-especially in recessionary times-treat ad buys as costs, not investments.
It's a short-sighted strategy.
And savvy competitors recognize opportunities such cutbacks leave open.
* Advertising, for a while longer, remains a buyer's market.
When high-volume advertisers pull back, TV commercial time fills up with promos, radio lets its talent keep babbling, and newspapers and magazines simply print fewer pages.
The law of supply and demand has driven rates low.
As we say in the DRTV biz...
there's never been a better time to buy.
* Advertising options are plentiful.
If you've always wanted in on a particular program-or even a new medium-space is available.
True, it's available even in robust economies if you're willing to pay enough, but even then the best ad slots book early.
What's more, the explosion of new formats that so frustrates old-schoolers obviously benefits advertisers.
There are now so many ways to advertise, there's always an affordable option to get out the good word.
Competition may hurt advertisers' market share, but it's always good for their media rates.
* History is on your side.
A recent New Yorker piece highlights a depression-era duel between the country's dry-cereal giants: Kellogg's and C.
W.
Post.
Post, cutting costs, cut advertising.
Kellogg's, investing, doubled its ad spend-and its profits jumped 30 percent in an economy far worse than today's.
A solid short-term bump to be sure, but the greater significance is that Kellogg's market share grab has endured to this day.
According to 2008 figures, Kellogg's controls 33 percent of the dry cereal market; Post owns 15.
If you surf online just a little, you'll encounter dozens of examples where investments in advertising returned big results in troubled times.
So the next time you're pitching a current or potential client-and everyone starts to carpet-bomb the conversation with their dueling ROIs-don't forget to define the last letter.
No company ever got anywhere without strategic and steady investment.


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