The room at the Crowne Plaza in Times Square began to fill in preparation for Dr. Augustine Fou’s session with a mix of lively music playing in the background. Dr. Fou, who has a quote on his business card that says “the art of marketing...distilled into science,” walked up to the podium, and I soon realized his tagline captures the essence of his presentation. In it, Dr. Fou poses the challenge of viewing performance marketing beyond the “affiliate” channel and declares “performance marketing” is a mindset, but he uses facts to back up his assertion.
To set up the context for this proposed mindset, Dr. Fou gave the PMI session audience background on the history of advertising which is currently at an inflection point. We’ve seen, he said, a dramatic change in the media landscape with consumers spending less time on newspapers and magazines, with the most growth of average time spent per day on mobile. Further, the introduction of new screens, i.e. Smartphones, tablets, laptops, have led to further changes in consumer behavior and the birth of the omni-channel consumer. This new breed has created a landscape where 90% of all media interactions are now screen-based, and only 10% are not screen-based. This shift in consumer behavior has led to the decline of newspaper and magazine advertising, as digital advertising has encroached on its territory. The encroachment hasn’t stopped there. U.S. digital advertising is also quickly gaining ground on TV advertising with 38% of ad dollars allocated to digital against 42% to TV(2006-2011).
Digital Shift Not a Challenge
The shift to digital advertising, however, was not all that challenging for advertisers as it was simply an addition of, or a change to, a new format, not a new way of thinking.
TraditionalDigital -> Addition of, or change to, new “format” ≠ not new thinking or new mindset
With all of the money going into digital advertising, it is important to note that multiple important studies show that consumers avoid digital display ads. Mashable reported that ads to the right of the digital page are only noticed by 23% of the respondents, and they spend only half a second on the ads. When looking to buy something, consumers search for the product, not a brand; they look for context, and at 92% of those surveyed by Nielsen, trust their peers the most, and ads the least at 33%. It follows, then, that a large percent of the display advertising dollars are not generating results. To prove that hypotheses, Dr. Fou offers the following based on 1% CTR, 1% conversion, and $20 avg ticket, 5%:
- $7 CPM means $70 ad spend on CPM basis, 10,000 impressions
- $1 CPC means $100 ad spend on CPC basis, 100 clicks
- CPA is lowest risk and most cost effective, $1 rev share
A Stealthy Shift to Performance
While performance makes sense, the shift has been stealth with few marketers even aware that they have tapped into the power of performance marketing. A recent study by the IAB showed that 64% of digital advertising today is performance-based leaving approximately 32% to impression and 4% to hybrid. Based on the changes in the digital landscape, tighter budget oversight, and much more beneficial return on investment offered by performance marketing, there is an opportunity to meet the needs of consumers for more context and peer contributions in their purchase decisions. There is further now a growing opportunity to leverage the full spectrum of choices provided by all of the channels that fall under the performance umbrella, from search to social, and everything in between, but this requires a change in “mindset.”
Dr. Fou outlined the following for this shift to take you from the storytelling of traditional advertising to the performance of efficiently marketing in the digital world:
- Who is your target customer
- What message do we push/shout at them?
- Where do we stick the message?
Marketing in the Digital World
- What information does target user need?
- Do we have that info available?
- Is it optimized so they can find and use it?
And finally, Dr. Fou proposed that Performance is…
- A digital tactic (affiliate)
- A business/pricing model
- Speedy Innovation
- Efficient organization
- THE new mindset