MROI, ROMI Maximisation, attribution, Media Mix Optimisation, advertising agency

OMR Festival 2019 took place in Hamburg on 12th and 13th of May 2019. This event brought together international stars of the digital marketing, promising new players and absolute experts to provide a thorough analysis of relevant marketing trends. Top speakers included the representatives of giants like Adobe, Google, Facebook & co.

A global management consulting firm McKinsey & Company also presented their inspiring innovations concerning “Marketing Operating Model”. They propose omnichannel person based optimization that has already proved effective and will save $15mln on marketing for Optus – the second largest telecommunications company in Australia.  

To fully understand how this new generation solution changes the industry we should start with the current standing; and the biggest challenge we are facing today is that many marketers still struggle with MROI measurement and in 60% of cases are unable to estimate either long-term or short-term marketing impact. Various approaches available today help to answer the MROI question, but none is flawless.

  1. A/B testing is a simple technique that allows to see incremental impact by comparing two groups, test and control ones. It helps to identify more successful media tactics and improve performance, but it cannot deal with a more complex task or create a strategy.
  2. Pragmatic Heuristic (RCQ) is a quantitative method which can be applied to different media channels and measures the cost per every reach. By applying this technique you can find the most cost efficient  media tool and optimize your marketing mix even in data poor environments. But this “tool”requires too much manual work and is difficult to beautomate. Another disadvantage is that it’s not completely objective.
  3. Consumer surveys allow measuring customer loyalty and brand awareness, successful launching of a product or obtaining customer demographics, but survey data is not absolutely reliable and objective due to human factor.
  4. Marketing Mix Modeling (MMM) shows incremental impact of all marketing tools. It’s a great instrument for optimizing marketing budget and balancing online and offline campaigns, but it lacks granularity and is backward looking, it also cannot show the effect of creative or message that potential customers view. You can read in more detail about advantages and disadvantages of MMM in this article.
  5. Multi Touch Attribution (MTA) is granular and perfect for capturing digital way of a customer, yet at the same time it is too short-term, so if more than two weeks passes between the first touch point and the conversion, than MTA will regard you as two different customers, since it keeps the information about your digital way only for 2-3 weeks. MTA also doesn’t take into account incremental sales and might give too much credit for digital media. You can find more information about Attribution here.
  6. MMM + MTA models make up for some drawbacks of each method, by adding incrementality to MTA and digital granularity to MMM, but it’s not a single model and they require complex implementation one after the other. It also doesn’t focus on upper funnel and creative.

The main drawbacks of existing methods:

  • They are backward looking and do not provide real-time data or allow for mid-campaign adjustments;
  • They do not take into account creative or message ROI focusing only on media spend;
  • They lack granularity;
  • They are too short-term focusing only on sales and neglecting upper funnel;
  • It takes too long before insights bring about changes.

And the REAL problem is lack of DATA.

McKinsey advised the following 5 methods to optimize marketing and increase your revenue by 2-5%.

  1. Optimize media budget distribution across different markets, products.
  2. Choose the best performing creative or message for every target group.
  3. Effectively distribute media budget across different channels.
  4. Make sure to use every tool or channel to your best advantage.
  5. Never use unverified content, media, tools or services.

MROI, ROMI, media budget, media spend, Media Mix Optimisation, advertising channels

What exactly this transition means?

This generation

Optimization based on aggregate data sets, with granular information available only for
digital media

Focus on mass-communication

Focus on media spend

Optimizing only towards the bottom of the funnel (sales)

Mostly backward-looking
Next generation

Granular optimization based on person-level data sets for both online and offline
media

Focus on specific segments

Considers not only media spend but also content/creative

Works with both upper and lower funnel objectives (brand to performance)

Almost real-time data allows for mid-campaign optimization
This generation Next generation

Optimization based on aggregate data sets, with granular information available only for digital media

Granular optimization based on person-level data sets for both online and offline media

Focus on mass-communication

Focus on specific segments

Focus on media spend

Considers not only media spend but also content/creative

Optimizing only towards the bottom of the funnel (sales)

Works with both upper and lower funnel objectives (brand to performance)

Mostly backward-looking

Almost real-time data allows for mid-campaign optimization

So instead of understanding only customer’s digital journey we’ll understand their total journey across both online and offline media channels and be able to attribute the impact on sales conversions across different channels.

What needs to be done?

The idea may sound attractive, but its successful implementation requires significant changes. Apart from introducing necessary tools like data integration, advanced analytic algorithms and special software that allows to cancel ad placement or change media mix at any time, companies will have to evolve to allow the new system to function properly. With constant flow of processed granular data companies will need people capable of making decisions on such data to optimize marketing campaigns and allocate media budgets. Another aspect to be changed is cooperation with advertising agencies to have a more integrated relations between agencies and customers. You need to set up partner agencies, so that you function not as two separate systems where correspondence takes weeks and terms of contracts cannot be changed, but as a whole where responses are prompt and conditions are flexible, with transparent data sharing and possibility of mid-campaign optimization. Some companies have already started this transition, for example one of the world’s biggest advertisers – Procter&Gamble – saved $750 million after setting up an in-house agency in wake of the transparency scandal.

McKinsey recommends to gradually implement this system even now despite the obstacles and lack of verified data, because over the next few years the business landscape will change and catch up with your needs.

There are four barriers to implementation of the system today:

  • There is simply not enough data
  • GDPR (General Data Protection Regulation) – strict legal requirements forbidding sharing of private information is a major obstacle
  • Constraining relations with agencies – there needs to be more transparent data sharing between agencies and customers, as well as more flexible agreements allowing mid-campaign decision-making and adjustments
  • Lack of personnel with new skills and expertise – we need people capable of processing granular data and making decisions on a regular basis.

It’s worth mentioning that despite operating at individual-level granularity Next Generation MROI follows privacy and legal requirements through aggregating or encrypting data. They also use opt-in questions by answering which customers allow to merge and analyze their data, and the system prevents re-identification of individuals.

Implementing this progressive technique requires boldness, a strong team of visioners who are ready to work hard and a right partner.And what you get is accelerated decision making, optimization of all media channels, in-campaign adjustment and increased revenue.

We can also offer product for media mix optimization, which has already been successfully implemented in large companies across Western and Eastern Europe, Latin America and the Middle East. It allows you to create a smart media plan and increase ROMI (return on marketing investments) by 10-20%.