Revenue is a lousy measure of success for most ad campaigns

Many variables affect sales, which don’t always correlate to how good your ads are. The only way to measure campaigns effectively is against the metrics you want to change and the time you need to do it in.

This year has begun pretty much the way 2018 ended, with a spate of big advertising campaigns that have divided the marketing community. Kaepernick for Nike. Elton John for John Lewis. Not to mention a certain razor commercial/public health broadcast for you know who.

Time and again the marketing community is split, apparently down the middle, about the commercial efficacy of the campaign in question. We discuss, we debate and then agree to wait until the sales figures are announced.

At face value, using the future fiscal performance of a brand as the ultimate measure for whether an ad is good or not does make sense. Aren’t we here, ultimately, to increase the revenues and profits of the brands we market? What better measure could there be than sales?

While it’s true that marketing’s mission should always ultimately be to find customers, increase revenue and generate more profit, there are some significant issues with using sales as a measure for advertising success.

The quarterback exception

Patrick Mahomes may not be a name you are familiar with, but over in America at the moment he is among the most famous athletes in the country. Mahomes is the quarterback for the Kansas City Chiefs American football team. Last weekend the 23-year-old displayed composure and capability beyond his years to produce a sparkling performance in the AFC Championship game – the qualifying match to see who will make it to the Super Bowl

Mahomes threw the ball for a total of 295 yards during the game, with more than half his passes caught by his team mates. That spectacular performance, under the intense pressure of a big playoff game, earned him a quarterback rating of 117. The average last season among his fellow quarterbacks was 88, giving you some sense of just how well he played.

But the Chiefs lost and will not be going to Super Bowl LIII. Despite Mahomes stellar offensive plays, the Chiefs’ defensive unit played relatively poorly during the game, allowing their opponents to score a whopping 37 points against them including an all-important final touchdown to clinch the game in overtime.
You may have no interest in American football but the story is a perfect metaphor for marketing. Turn Mahomes into advertising and make revenues the equivalent of the final score in the game. The young quarterback played out of his skin, but his defensive teammates weren’t performing at anywhere near his level.

Revenues don’t belong to you, they come from a competitive tussle in the market that depends as much on rivals as it does your advertising.
Advertising, like a quarterback, is a very important contributor to any ultimate commercial success but it’s not the only variable in the calculation. If a company’s price is set too high, for example, or the product has fundamental quality issues or design flaws, no amount of great advertising will save the day. It might even speed it’s decline.

One of the givens of the Kaepernick campaign was that Nike had a great array of products, distribution and pricing to enable enthused customers to go out and buy stuff with a swoosh. It’s an obvious point but, all too often, when communications burns brightly, other aspects of a brand’s offer rarely achieve the same levels. Revenues don’t grow the ad is blamed for the miss when its performance was one of the few elements of the marketing mix that was done well.

The competitive context complication

There was another reason the Chiefs lost last weekend. It’s called Tom Brady. He is the quarterback of the New England Patriots, who outplayed the Chiefs in a thrilling and ultimately overpowering manner on Sunday. One might even argue that while the Chiefs played well, the Patriots simply played better.

In the same way, another confounding issue in using revenues to assess advertising is that even when an ad performs brilliantly, the subsequent sales numbers are as much a function of competitor activity as your own marketing tactics. Elton John could have pulled every heart string in Britain in December, but if Amazon had outspent John Lewis in advertising terms the impact of the John Lewis ad would have been significantly lessened. Not because the campaign was poor but because a competitor outmatched the spend or creative, or both.

And it does not always have to be a superior competitor that robs advertising and marketing of its expected glory. One of the best marketing campaigns I ever worked on was scuppered because our idiot competitor responded to our initial success by dropping its pants on price to a ridiculous level.

That tactic had three ultimate effects. First, our foolish rival took almost all the market growth. Second, it did so at a price that was unsustainable and eventually forced it out of the category in our country. Third, its foolhardy efforts made my client look – at least from a superficial point of view – even dumber than the idiot competitor, which now had three times our market share.

Whether they are geniuses, foolish or something in between, competitors have a very annoying habit of doing stuff while you’re doing stuff. And that stuff tends to impact revenues just as much as – sometimes more than – your own strategy and executions.

The fancy word for this is exogeneity. The simpler version is that revenues don’t belong to you, they come from a competitive tussle in the market that depends as much on rivals as it does your advertising.

The dreaded ‘T value’

Another manifest issue of using revenue as the benchmark of advertising impact is the always slippery issue of time horizons. When exactly are we going to start counting the revenue impact of the campaign? And when do you propose that we stop?

Researchers Peter Field and Les Binet make a very strong case that many of the major effects of advertising can only be assessed two or three years after the execution has been aired. That makes revenue estimates doubly problematic. First, because you have to be sure that some of the revenue bump you want to claim is not a causal hangover from a previous campaign. Second, depending on the category you operate within, it could well be a matter of years before you can make a proper estimate of your total revenue impact.

Timing is a particularly problematic issue...

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