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Calculate the ROI on Your TV Advertising [Ecommerce Startups]

24th Jul 2012
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In the first part of this series of articles, we discussed whether an eCommerce company should be on TV. In the second part, we cogitated on what might be the right time to launch a campaign. In this last of the three part article on TV advertising and its outcomes for Ecommerce start-ups, we will cover the topic of ROI measurement.

The ability to track the user behavior from start to finish is the both the advantage and bane of advertising online or for online businesses. Agencies and marketers are always playing on the back-foot as the business demands to know how much sales was generated by each rupee spent. I, equally, agree and disagree with marketers lament that there is more to advertising than customer/sales acquisition!

ecommerce
Online advertising is fairly straightforward (or so it seems) you buy inventory, track the click-thru rates, the analytics tool will indicate transactions acquired, cost per acquisition (CPA), revenue, product etc thus allowing you to distill the information in many different ways. Simplistically put with the advertisement and the sales channel both online it is possible to track end-to-end.

Clearly, the above is not the case when advertisements go up on air. Offline media presents only one way communication channel; the consumer doesn’t interact with the media s/he only consumes it. There is no way to establish the direct link (there are exceptions, discussed below) between what the consumer sees and when s/he interacts with the brand. And this is the crux of the problem that we will attempt to solve for here.

We have heard this over and over again – “The results of a campaign are as good as the planning and execution of the campaign.” – and yes that is the supreme truth of marketing.

This conveniently leads us to the next point that is before you start calculating the ROI you need to set campaign expectations. List down the events you anticipate, guesstimates on numbers and time to impact for each event. For ex: Impact on newsletter subscription, 20% growth, m-o-m growth for next three months or % increase in the number of users entering the shopping funnel. Pick key metrics that will clearly be impacted by the advertisements and are critical to success of the business and consequently the campaign.

Assessing the duration of impact of a campaign is most critical part of the ROI calculation. This is especially true for offline advertising because the impact lasts beyond the time when the ads are actually on air. (For ease of discussion I will use the word TV-ads to represent all offline advertising.)  So while the ads are on air for 45 days, the impact could last well beyond 90 days with long-term residual effects.

If you are wondering what key metrics to evaluate here’s a tentative list – increase in direct traffic, share of direct traffic, increase in SEO traffic especially through the brand keywords, email subscriptions, lowered bounce rates, increased responses from Facebook page, increased product searches, increased CTR’s of online ads, increased conversions from online advertising etc.

The biggest and most obvious impact of TV-ads is number of people visiting the web site typing in the URL and that is the single most important metric to track. If your direct traffic is not going up by over 80% and the share of direct traffic not jumping to a high 40’s you will have a lot to answer for!

The acquisition cost during the advertising period should not include the offline spends, because the true impact of offline advertising is long-term. This in-flow of direct traffic, as a rule of thumb, stabilizes at a high point and remains there until the next burst of advertising activity. So while at first the acquisition cost sky rockets it plummets levels lower than online acquisition costs.

The other side-effect of increase of share of direct traffic is that by pure arithmetic the share of higher converting traffic goes up (direct traffic always has the highest conversation rate among all traffic sources) and thus the overall cost per acquisition (CPA) goes down. This creates a virtuous dominoes effect; conversion from all traffic sources goes up. The caveat being this occurs only and if only when advertising generates direct traffic.

A tactical but useful way of measuring responses is to use deal codes or tracking codes. However, this should be done only if it ties in with the overall campaign. To put a deal code in the 30 sec only for the sake of tracking would be pointless. The consumer will not notice and you will construe it as a failed campaign.

Then again the ROI is always measured from point of view of CPA. Most often, marketers forget to use their media campaigns to leverage better deals with the suppliers. Marketing teams should work closely to push certain products if it allows for higher margins. The fallacy is that the product has to be put on the advertisement. The web site will be the hub of all traffic and there is valuable real estate available on the web site for pushing these high margin products.

In fact a good marketing plan does backward integration. Work with suppliers for high margin products, ensure availability of high margin products and then push sales for high margin products. The bottom-line that’s your best ROI!

About the author:

Gayatri Buddha is the Director at Signum Tree, a Marketing and Business Consulting company for internet companies. In her last stint, Ms Buddha was Assistant VP – Marketing and alliances at MakeMyTrip. In her 15 years of experience, she has been associated with successful launch of two internet brands in India – MakeMyTrip and Monster.com. She is among the few online marketing professionals who have deep understanding of both online and offline media. She is currently pursuing her MBA at Kellogg’s.

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