MROI and Performance ParadigmIn Digital Marketing

Silicone Free Conference

Moscow, 27 April 2012.

©+® Marcin Winkler

The trend:Where we are now with online

advertisement?

Source: Forrester Research

Interactive Marketing Spend

Online advertisement grows fast and becomes more diversified

Key question

How to measure result in monetary terms?

Answer: Return on Marketing Investment

MROI = ΔProfit

Cost

Key principles

• Incremental approach

• Acquisition cost and customer value (LTV)

• Result attribution

• Optimization

Incremental approach

Incremental approach

MROI = ΔProfit

Cost

Δprofit = Δsales - cost

How much would we sale without any advertisement?

Example: incremental brand effects

Source: IAB

Brand engagement index

In this case measured brand is established one and achieves 29% brand engagement index without any advertisement (control group)

Two other groups were exposed to advertisement (TV or TV+ Internet)

We can conclude that internet builds here an incremental brand engagement of 4%

We can do exactly the same with any marketing metric (e.g. sales)

Total sales = baseline sale + incremental

Lifetime Value of Customer

Example:

the client is in the basket and purchases a phone for PLN699 and a tariff of PLN139 a month

Is Value of PLN699 our incremental revenue for ROI?

No! It is single transaction value that does not take into account

other revenue streams

Lifetime Value of Customer

Source : The University of Chicago Booth School of Business “Data Driven Marketing”

Example

LTV should be the reference for acquisition cost and budget level

Source : The University of Chicago Booth School of Business “Data Driven Marketing”

Attribution

The fundamental question marketers should ask:

“Whereshould spend my

marketing $ to get the best return?”

Source : Ignition One

GOOGLE PAID SEARCH

FACEBOOKSPONSORED STORY

Source : Ignition One

MAIN PORTALDISPLAY ADVERTISEMENT

Source : Ignition One

GOOGLE PAID SEARCH

TRANSACTION!!!

Source : Ignition One

What caused a user to convert?

Display Advertisement(Banner)

Social Media Paid Search

We need to model path to purchase and attribute the success based on

inNot just on last click!

ROI Optimization

Reallocation of budget

• €150, 000• 300 Sales• CPA €500

• €150, 000• 370 Sales• CPA €405

Scenario testing

Use A/B or Multivariate testing to choose optimal scenarios:

•Offers•Creative lines•Channels

Example: Scenario testing - emailing

vs.

Samsung Galaxy Gio for $1Exchange $1 for a Smartphone

Making purchase easy

•Analyze purchase funnel in your eShop•Streamline the process•Reduce number of steps to minimum•Help them•Retarget

Help customers to close the deal

LIVE CHAT AND PRIORITY SERVICE FOR ENGAGED USERS

Summary

• Use incremental approach

• Set budget in line with ROI and LTV

• Attribute results

• Keep on optimizing!

Thank you for your attention