July 8, 2011
Rocco de Filippis is an intern on the client services team. Rocco studied Behavioural Economics at University of Maastricht and the Sapienza University in Rome. He spends much of his working day at Infectious Media analysing and optimising campaign performance.
As other forms of online advertising develop, the role and effectiveness of display online banners has been a source of much debate. Research (Dreze and Hussherr 2003; Ilfeld and Winer 2002; Internet Advertising Bureau 1997; Sherman and Deighton 2001) has shown that exposure to banner advertising leads to increased brand awareness, purchase intention, and site visits but the relationship between advertising exposure and actual purchase is still uncertain.
The main problem is “how do we measure the effectiveness of a banner?” The first and easiest way is through exposure based metrics: computing the number of impressions served gives an idea of the campaign’s reach. However, many advertisers prefer to allocate budget based on the sales target of the campaign rather than purely on its reach. Since they are not directly linked to sales volume, the number of impressions served has not been considered a good indicator for display advertising effectiveness. The next measurement evolution for banners, was then to look at click-through rates (number of clicks per impression served), but why is a click any better than reach? After all a click simply means a user has visited the advertiser’s webpage, but we know only a small number of these visitors actually go on to buy. We then come to CPA (Cost Per Action) commonly considered the most reliable indicator for the efficiency of an online advertising campaign. It is my opinion that CPA has its place but that it shouldn’t be considered as a measurement panacea for all banner advertising.
In few years there has been a proliferation of online advertising vehicles, so that today we can choose from:
* Banner Ads
* Paid-search (PPC) and SEO
* Social Media
It is my contention that, each has a different function. The time gap between becoming aware of a product and buying it can be quite long, and along this path to purchase different display ad formats can perform better than others: Social media ads can spread awareness among friend networks: Video ads are more suitable in convincing someone of the attractiveness of a product; SEO optimization can enhance the likelihood of a direct conversion, but what about banners?
Have you ever seen this picture?
It was shot in Burkina-Faso, one of the poorest countries in Africa, and one of the poorest countries on the planet. There are several examples all over the World of similar Coca Cola boards placed in villages where people are so poor they cannot afford to buy water and food, not to mention Coke…so why does Coca Cola spend money on ads which have a likely conversion to purchase of almost 0%? I believe the answer is that they are not aiming for conversions at this stage of the ad-process.
In order to understand and measure the effectiveness of an advertising campaign a number of advertising hierarchy effect models have been developed. The most basic and interesting in my opinion is the Lavidge and Steiner’s one (1961) since it links the different steps a customer takes with three main psychological stages (see diagram below). The idea is that rather than directly jumping to a purchase, consumers have to fulfil each step before moving to the next psychological stage. The gap between one step and the next can be short but reaching the next psychological stage generally requires a longer time.
This is why certain ad types perform better than others during a specific stage or step. There isn’t an absolute “best ad”, but: banners tend to be better than SEO in the cognitive stage, while video ads perform better in the affective stage. Using CPA as the only indicator for the efficiency of an online campaign will actually maximize the likelihood of a purchase but only once that the user is already in the Behaviour Stage. Getting rid of banners is an easy way to lose a very big slice of the pie, represented by users that potentially could buy the product but without banners may not even know it exists. I believe the efficiency of banner ads can go even far beyond this model: in fact this is a model based on “consciousness”, since in every stage described something is happening at a conscious level…but what about our sub-conscious? In the last 10 years, studies on the brain activity has been widely quoted in the academic and marketing frameworks: As part of my academic studies I looked at Neuro-economics and the first thing you learn about the brain is that we do not know the brain We know what happens at a conscious level which is only 2% of our brain activity, but the remaining 98% is the “un-explored sub-conscious” which accounts for almost all of our decisions. When we choose something, we think we are evaluating data to take the best decision but actually most of our mind is already made-up and we are just fine-tuning what our sub-conscious has previously evaluated using a huge amounts of data (most of which are images and keywords) stored through perceptions in some “un-reachable” part of the brain. Data that we aren’t even aware of but that have had an impact upon us.
That’s why it is more likely that a man from Burkina-Faso will buy Coca Cola rather than any other soda. That’s why it is wrong and reductive to measure the efficiency of banner ads using a last-click attribution model (see the previous blog article from Harley on this issue) or to say expenditure on banner ads should be reduced. For an advertiser wanting to maximize the efficiency of his/her campaigns it is important to understand the synergies between adverts. CPA with a last click-attribution model will often show SEO and PPC to be the best performing advertising vehicles. Using this logic, it then seems wise for advertisers to transfer all their funds to this kind of advertising. Nevertheless, by doing so, it is my conjecture that they will observe a drop in the overall conversions as they lose those customers in the Cognitive and Affective stages. SEO and PPC seem to perform better than other online advertising simply because current measurement practice is completely tailored to them. A smart advertiser will use mix of online advertising, measured in different ways. CPA can be used at a “universal” indicator but then the attribution model must change appropriately to take into account how every different advert along the path to purchase has contributed to the actual sale: the focus has to be redirected to the big picture rather than on a single vehicle of advertisement.
to put it another way, strategic planning is pivotal to maximize the efficiency of a campaign: you can build the most beautiful table with a surface of ebony but if you want the table to stand properly, you should not forget to take care of the legs as well.