Making sense of the changing advertising landscape
I recently read an article by AdWeek that suggested the definition of Advertising has never been more unclear. The author, Randall Rothenberg, listed several reasons why he thinks this is the case. His core argument was that the definition of advertising is unclear (and advertising is harder than ever) because there are more advertising mediums than ever before. This made me think, “Is the problem with the number of mediums or with knowing which medium is best?” If this is the case, it ultimately comes down to a “measurement problem.” If advertisers knew which medium (or combination of mediums) gave their campaign the best chance of success, I don’t think the number of mediums available would be looked at as a problem but rather an opportunity. So how do we know which advertising medium is best? More than ever, the advertising industry needs to have necessary LASIK Surgery by using sophisticated measurement tools to clear up the muddy landscape.
As the number of advertising mediums is at an all-time high, the problem is not necessarily with measuring each medium by itself (although that’s always a challenge), but rather understanding the correlation between the different mediums. In other words, the challenge is identifying how spend in one medium (i.e. Print) may have impacted another medium (i.e. Radio). If you can do this, you not only know which mediums to participate in but how much to participate in each medium (the optimal spend for each medium).
Media-mix modeling, aka Return on Marketing Investment (ROMI) Analysis, is a statistical procedure designed to estimate the impact of various marketing investments. The result of this exercise, a media-mix model, is then used to forecast future return on marketing investment.
This type of procedure helps you identify which areas and to what level you should be spending your advertising dollars. It’s important to understand that your advertising dollars will function like an “S-Curve”. There is a minimum amount of spend required to see any increase in sales and there is a point of diminishing return where each advertising dollar you spend has less and less of an impact.
To better understand how Media-Mix Modeling works, watch this episode of the MRX Minute.
As AdWeek suggests the Advertising industry is in a state of muddy water, I hope we all choose to invest in LASIK Surgery (Media-Mix Modeling) to enable our “advertising eyes” to see clearly in a world of confusion.