At the end of the 19th century, department store owner and marketing pioneer John Wannamaker famously turned the phrase “Half the money I spend on advertising is wasted; the trouble is I don't know which half.” No doubt it’s a quote you’ve heard many times before.
Yet the truth is, over a century later, marketing departments are still wasting huge amounts of money on unsuccessful strategies. Along with poor performing advertising, they’re chasing the leads that don’t bring in enough money, while failing to identify the prospects with the potential to deliver disproportionately large profits.
Even as recently as the start of 2017, 47 percent of mobile adverts in the UK fail to reach the right people, wasting businesses across the country a total of £750 million every year. For programmatic ads the stats are even worse, with 60 percent of marketing spend being wasted.
Equally, for many brands heavily reliant on direct mail to send catalogues and brochures, £millions is still wasted on sending expensive mailings to the wrong people.
Some businesses are falling into a trap identified by another intellectual from the 1800s – Italian philosopher and economist Vilfredo Pareto. His equally famous ‘law of the vital few’, if applied to marketing, is bleaker still: Pareto would suggest that 80 percent of your campaign’s reach comes from just 20 percent of your efforts.
Whichever theory you ascribe to, wasted marketing, mailings and advertising spend doesn’t have to be accepted. Businesses need to get to the root of the problem, which is effective targeting and paying close attention to performance.
Whether an online ad that never finds human eyes, Adword keywords that do not perform, or email and direct mail campaigns going to the wrong person, the key to identifying and eliminating wasted spend is ready to be found with data analytics.
Increasing the ROI on your marketing spend isn’t easy, particularly when so much is out of marketers’ control. So, one of the first things to do is to break down assumptions, particularly when looking at performance reports. Receiving views and clicks are great, but what are the quality of them? When looking at search engine analytics, is there a percentage of others beyond Google you aren’t seeing profit from? Are you channelling efforts into an audience that will little more than ‘kick the tyres’ but never purchase?
Shaping your strategy with big data analytics wasn’t an option for Wannamaker and Pareto but marketers now have a wealth of available data to test, refine and optimise how they work. This could mean segmenting customers into preferred marketing channels based on historical results. It may mean using customer insight to single out your most responsive and profitable customers. Or, equally important, adjusting your strategy to move budgets away from those with a higher cost to serve.
It’s possible to break the 80/20 rule – you can find out who that 20 percent is and look for more of them. You should know which half of your advertising doesn’t work – you have the all the data you need to find out. It’s time to stop using 19th century excuses when there are 21st century solutions.
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