Advertising ROI: Can you do the math?

A Markham, Ont., software company is trying to add a little more science to the art of advertising.

Custometrics has launched Ad-Catalyst, a tool it says can help predict and calculate return on investment (ROI) for advertising

campaigns. Senior partner and CEO David Beaton says it is a combination of modelling and optimization technology that measures, predicts and optimizes marketing activity.

“”We model the relationship statistically between our client’s marketing activities and changes in their sales levels,”” Beaton explains. “”Once we understand those relationships we build specific optimization algorithms that allow them to understand what best combination of target markets, or marketing activity, will give them the biggest sales changes.””

Beaton says Ad-Catalyst offers the ability to evaluate the role of mass media—TV, radio, newspapers — and direct marketing. It can also show clients the best combination of activities for driving sales changes, while detailing the relationship between ROI and campaigns.

“”What we do is look at sales history from our clients going back a number of years and we take a look at that at a very minute level of detail,”” Beaton says. “”In the case of a retailer we’re interested in sales for every given retail outlet that they have. In the case of someone who is more like a bank or a telco, we’re interested in sales by specific markets and parts of markets.””

The process doesn’t happen overnight. Beaton says it takes two to three months before the model is up and running. At the start of the project, he says, the parties sit down and discuss what exactly the client wants to optimize, and this will vary depending on the industry, product and sales method. But at the end of the day, he adds, ROI is ROI.

“”Some clients are in the business of acquiring customers, so they look at what’s my cost-per-customer acquired. Others are in sales, for example a retailer. So they may be more interested in how many dollars in sales am I getting for every dollar of advertising I spend,”” Beaton says. “”Once you work out for them a measure of success which relates directly to the dynamic of their business and how they make decisions we then build the models around that.””

Mark Weisbarth, president Due North Communications Inc. in Toronto, says making predictions is difficult but not impossible.

“”It’s easier in the direct marketing world, but in mainstream advertising it’s hard,”” Weisbarth says. “”The research that you can do ahead of time is limited in its predictability. People have tried in vain to measure the potential for creative impact. All you can do is measure what happen after the fact.””

Jason Bond, an account supervisor with SGCI Communications in Sackville, N.B., agrees and adds there is a market for such a product if it works.

“”There are lots of companies that have their own research divisions in-house,”” Bond says. “”You really don’t know how much impact you’re going to have on that person.””

So far Beaton says it has been on the money with its predictions.

“”Our in-field performance has been outstripping what we’ve been forecasting in the models,”” Beaton says.


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