Opinion
Managing the Paradigm Shift
26 January 2012
Who doesn’t remember the good old marketing communications days:
Advertising was concentrated on traditional media.
GRPs ruled supreme.
The main discussions were about how to get exact GRPs and how to compare them between TV and print.
Of course events and sponsorship were out of the GRP sphere but they were treated largely as hobby horses for specialized departmental directors or the CEO anyway. And sales promotions, PR and other communication channels created their own specific currencies.
Although some weird mathematicians had come up with econometric modelling as a means of measuring effectiveness, this was by far too complicated, too slow and too expensive.
So most people were content with John Wanamaker’s (or Henry Ford’s, depending on which source you believe) infamous quote about happily wasting half of his advertising dollars and looked for awareness as a pseudo effectiveness measurement.
And the common target across the industry was to reduce the cost per GRP and to improve their quality.
Oh happy days…
The effect of new communication channels
Cracks began to appear with the start of internet advertising in the nineties and the crazy predictions about its growth.But then the crash of the ‘New Economy’ at the beginning of the new millennium put things into order again. Traditionalists could lean back and continue to ridicule the 2-3% share of online.
Problem was that unlike old soldiers online just didn’t fade away.
The Global crisis of 2008/2009 certainly highlighted this fact.
In traditional media cost per GRP melted like snow in the midday sun and advertisers started shifting more of their investment to new communication channels. For one month in the UK online investment actually overtook TV.
Had the world gone mad?
Well, sort of. A look at Zenith’s 2010 ‘Western Europe Market & Media Fact’ shows 5 countries with more investment in online than in TV –including the UK!
This is the new reality.
And part of this new reality is that the good old certainty of a common media currency has gone.
While GRP still applies to the traditional media it’s pretty or even totally useless for most of the new communications opportunities springing up everywhere. Just try counting online results in GRP, or Facebook followers, or Search…
Good luck to you, but Social Media has no GRPs.
This means that the common media currency –the GRP –has lost its role. And this directly affects the once universally overriding objective of efficiency optimization. Cheaper GRPs. Better quality GRPs.
For generations this principle of efficiency optimization was the driving force behind most marketing activities.
Media agencies were built –and thrived -on this exact principle.
All gone.
So what now when the unifying steering function of the GRP based efficiency optimization is lost?
Then we obviously have to turn to what should have been the driving force all along.Obviously, we need to be looking at effectiveness.
What really drives activities, what really shifts the products or changes perceptions or image.
We must get back to these poor mathematicians with their dreaded algorithms. We need to get them out of their backrooms and see how their methods and tools can give us a new currency for marketing communications.
One that includes each and all of the old and new and future marketing and communications opportunities.
Instead of efficiency optimization we need to concentrate on marketing effectiveness.
New pressures on marketing
In the meantime things have also changed in the corporate boardrooms.
For ages the marketing guys had been the ones with the brightest ties, the coolest offices and the hottest secretaries who had to fly to a photo shooting in the Bahamas from time to time.Let’s face it, that’s why we all went into marketing in the first place.
Marketing could spend millions on marketing communications activities without having to show the results for it.
Some sophisticated marketing mumbo jumbo was usually enough to keep their bosses happy and to ensure the budgets were renewed. And if all failed there was always good old John Wanamaker/Henry Ford with the remark about the wasted advertising dollars…
However, all good things come to an end and eventually the CEO’s and CFO’s started asking really awkward questions about Marketing Return on Investment –MROI. They wanted to know where all the marketing investment went to and –worse –what it actually had achieved.
What a cheek!
Today there is virtually no agency pitch, no media audit run by marketing alone.Welcome the procurement and finance guys!In one of the universities where I teach they are seriously thinking about introducing a degree course in Marketing Controlling.
Just imagine!
So if marketers increasingly have to answer the questions about MROI where can they turn to?No good talking about better cost per GRP. Even awareness discussions have their limits…CEO and CFO want to see clear evidence about the results.
What did the investment in that brilliant TV campaign really do for the corporate image? How much did the million $ sponsorship contribute towards overall turnover? How do all the clicks contribute towards shifting the products from the shelves?
Managing the Paradigm Shift
All of this calls for marketing effectiveness measurement.
We must know the exact contribution of each marketing activity towards our KPIs. Only then can we manage –and optimize -marketing properly.
The former overriding paradigm of efficiency optimization is a secondary consideration. What counts is effectiveness.
The UK marketplace has understood and accepted this to a much larger degree than continental Europe. Whereas UK based advertisers have quite a tradition of using marketing effectiveness measurement , the rest of Europe still wastes too much time discussing whether it is really a good idea and how it can be implemented. Even the presence of reputable modelling and analytics firms on the continent could not stop the wide-spread mistrust and ignorance about the practice. This puts companies in continental Europe at a clear disadvantage and definitely needs to change.
But even if this does change, the big question about traditional econometric modelling as the only way to properly measure effectiveness remains: Can the traditional forms of econometric modelling deliver all that’s needed?
Can we really continue to accept the inflexibility and non-transparency of the current models? Can we really wait for months for all too often dubious or too general results? Are we really willing and able to continue accepting the often prohibitively high costs? And what will the finance guys say to this?
Facing the two fundamental developments and the ensuing Paradigm Shift in marketing we need big changes in econometric modellingas well.
Not only the mathematicians but the practice as a whole has to come out of the backroom and become a standard tool for advertisers and agencies alike to be able to take the central function in marketing which is required.
It is clear that in future, the increasing complexity of the marketing landscape and the growing demands on marketing will make it imperative for all advertisers to integrate marketing modelling directly into the centre of their planning operations. Analysis can no longer be an afterthought but must be incorporated into each part of the campaign management process.
To do this we need:
-marketing modelling technology with very high flexibility to cover all marketing activities and total transparency so we don’t have to continue living with a black box situation.
-a technology which is very much faster than the current one to allow analysis for all activities on all levels –from the strategic down to the operational and even tactical level.
-And a solution for advertisers to analyze their marketing effectiveness in-house allowing them to keep their most confidential data confidential and to use modelling continually for analysis and optimization.
This will create a new empowerment to advertisers and provide them with the tool required to support the Paradigm Shift in Marketing.
It will speed up the process and facilitate the necessary changes towards proper Marketing Effectiveness Management as the paradigm for the future.
Exciting times, indeed.
Bernd Reuter, Bernd Reuter Consulting