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[Blog Series] The Most Expensive Phrase in Business: “We’ve Always Done It This Way” – Part One


Introduction from Andrew Joyce | Senior Vice President, BI  + Analytics
MeritDirect | ajoyce@meritdirect.com

Insight from Kevin Hope | Vice President, BI + Analytics
MeritDirect | khope@meritdirect.com


“…Because that’s the way we’ve always done it…”

If we had a nickel for every time we’ve heard that phrase from clients we would be rich!

At MeritDirect we occupy a unique position in our industry—we work across hundreds of clients in almost as many industries, all with unique value propositions, innovative products and proven go-to-market strategies.  What they have in common, of course, is the practice of direct-response marketing regardless of channel.

This perspective has afforded us the privilege of seeing how a variety of businesses tackle the same problem.  We know what works and what doesn’t across any one of a number of marketing practices.  We know the answers to many of our industries “how” and “why” questions.

Unfortunately, this perspective also can show us the dark side of many organizations—the most common bad habit is shutting down exploratory conversations with:  “We’ve always done it this way” (WADITW).

Our experience has taught us that if your organization has a marketing strategy, process or modus operandi of any type that can only be explained with WADITW then you have a marketing problem.  If you have a team member that feels comfortable shutting down productive conversations with WADITW then you have a team member problem.

WADITW is the sworn enemy of an open, progressive organization that is always looking to improve.  In this three part series, MeritDirect’s BI + Analytics group will share stories of encountering and overcoming WADITW from across our client base, starting with non-branded search.

[Part One] WADITW: Non-Branded Search

The sophistication of online advertising, as well as the tools available to measure the impact within the online channel, allow todays marketers to optimize spend for almost any metric they desire. Want to optimize your ad spend for conversion rate? Click button X. Want to always be ranked #1? Click button Y.

Because of this flexibility, clients often look to measure results based on something that is comparable across all channels. And the most common way to do that is to just take Revenue/Spend—AKA ROAS. It’s simple, straightforward and widely accepted as the most universal way to measure the success of marketing efforts. When we talk to channel practitioners about why ROAS is their most important KPI, they often answer “we’ve always done it that way”.

When evaluating Paid Media (like Paid Search) through the ROAS lens one campaign type will stick out like a sore thumb: non-branded paid search spend (for our purposes, non-branded campaigns are those that contain keywords that do not reference the name of your company).  Why will it stick out?  The ROAS of these campaigns is always a small fraction of branded campaigns (those with keywords who do reference your company’s name) and almost always < 1:1.

As a result most clients tend to keep non-branded campaigns on a short leash.  If your business uses ROAS when evaluating PPC campaigns you are probably no exception—and we believe you are leaving money on the table.

In our experience this specific piece of marketing spend needs to be evaluated by different rules. In most cases- these rules need to live outside of your measurement tool for two main reasons as depicted in the example below.

  • For most B2B marketers ~50-90% of their orders are processed offline. If your business is anywhere close to this range than you must already know that the money you spend online influences offline buying behaviors. Suppose our company right now is in the middle of evaluating various software solutions for next year. We are gathering a lot of information gleaned from research that began with terms entered into search engines and combing through a ton of software company websites and online material. A big part of our journey for this software solution can be influenced through online advertising- yet as a company we know well ahead of time that we are making this purchase after we get a sales rep on the phone to discuss the specifics. Guess what happens when we finally pull the trigger? All the online ad spend that was part of our journey gets ZERO credit for having influenced us as a prospect all because we prefer to deal with a salesperson vs. the website. This (obvious inaccuracy) is the unfortunate side effect when you only trust online measurement tools for measuring the effectives of non-branded search spend. You may even go as far as suspending the most influential campaigns by sticking to online only measurement!

 

  • Secondly, using the immediate ROAS as the primary means of measurement pays no mind to everything that happens downstream from that initial prospect conversion. In the scenario depicted above we need to make sure we understand the primary goal of non-branded search- and that is to acquire new customers! So why would we ever measure this effort by the same metric we use to measure our branded campaigns? We can’t- it’s apples and oranges as the goal of each is unique. The $9,000 in the example above is only revenue from the customer’s first order. But we all know, regardless of the business we are in there are (potentially) second, third, fourth (and so on) orders down the line. Let’s pretend the total value of this downstream orders is $11,000 in year two and then $8,000 in year three. Well then, that initial $8,000 we spent really yielded us $9,000 up front and $18,000 over the course of the following two years. That incredible success story is hidden by a focus on the initial ROAS—the fuller picture takes some extra effort outside of the online measurement tools to quantify. When evaluating a channel by ROAS, which in most cases is that way you have always done it – you ignore future value and it’s one of the biggest crimes in direct marketing.

 

Kevin Hope
Director | BI + Analytics
khope@meritdirect.com

 

 

Click below to read the rest of the series:
[Part Two] WADITW: Growth Forecasting
[Part Three] WADITW: The Marketing and Creative Relationship

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