Measuring Effectiveness of Advertising

Definition

Measuring the effectiveness of advertising allows you to calculate what return you are receiving on your promotional investment.

What it is: Measuring the effectiveness of advertising will show what results you received from your advertising efforts, how they compare to the desired results, and the cost-effectiveness of the results. To measure the effectiveness of the advertising, you must first have the desired metrics of what you were trying to accomplish so you can measure whether they were reached. See promotional strategies tool in this library: Promotional Strategies page. To determine if the advertising was cost-effective, you must look at all costs associated with the advertising (content creation, placement, management, etc.) and compare that to the results received. See the financial analysis of social media tool in this library: Financial Analysis of Social Media.
What it does: Measuring the effectiveness of advertising allows you to determine if the return on your investment in advertising was worth the cost. How much bang for the buck did you receive for the investment and effort you made? If the advertising you paid for did not achieve your goals for effectiveness in meeting the desired metrics or providing a positive return on the investment, you should consider modifying your promotional strategy or cease the advertising completely.

How is it used: Measurement of advertising effectiveness is used to plan for changes in the promotional strategy based on the effectiveness and financial returns of the previous investments made in advertising. If the current promotional strategy is meeting and exceeding expectations, it can be renewed or even increased. If the promotional strategy is not meeting the metrics or returning a positive financial return, then the strategy should be changed or eliminated.
Where: Many large and small organizations have measured the effectiveness of advertising in the past. It was not well known or, in many cases,not well done. With all of the new analytics available to businesses, the measurement of effectiveness is becoming much more common. It is almost essential for large businesses and is now much more common even in small businesses.
Why: If you are not measuring the effectiveness of your advertising and promotion, you are potentially throwing away money on worthless advertising or underutilizing profitable advertising.

Where it shouldn't be used: With the availability of free analytical tools, there is never a situation where you shouldn’t use the measurement of effectiveness.
Any restrictions: None
Warnings: Be sure that your metrics and expectations are appropriate. You may be measuring the wrong things, so you may continue to use an advertising program that generates likes but no sales, or you may cancel a program that is creating awareness and facilitates a sale later in the process, but that you did not consider in your effectiveness calculations.

Establish expectations and metrics: Be careful to establish the measurements and metrics that have the greatest impact on your business. Measure what the advertising is driving. Consider the impact of the advertising on the purchase process for your customers. Be sure you understand your target audience and what drives the decision process and their desire to engage with your company or organization. Some of the most common metrics and engagement that you might measure include the following:

Awareness: Measure the change in awareness of your target audience. Measure both awareness and the level of awareness, as well as brand recognition.
Sales: How much have sales changed for the target audience? Were there collateral sales impacts in adjacent audiences?
Interaction and engagement: Was there an increase in the forms of interaction and engagement from the target audience driven by the advertising? If the desired interaction and engagement has shown to impact eventual sales or price, then the advertisement met the desired outcome

Pre-testing to Determine a Baseline: With the use of free and or sophisticated analytics, you can establish a baseline for awareness, sales, and engagement.
Utilize analytics to Measure Impact: With the use of free and or sophisticated analytics, you can measure impact on sales in minutes and hours, not days or weeks. You can modify the advertising efforts throughout the hours or days to see how changes in the advertising change the measured metrics and effectiveness. Of course, there are types of advertising and engagement that must be measured over longer time periods.
Calculate measures of effectiveness and compare to expectations: Complete the calculations of all measurements and metrics and create the reports. Consider tools such as those below:

Modify strategies, plans, and future advertising and promotion: With the data collected on the expected metrics versus actual performance, the leadership can determine if they are satisfied with the results or not.

Increase the budget for advertising to receive even more benefit from the results.
Maintain the budget for advertising in the future to maintain the results they have seen.
Decrease or eliminate the budget based on the need for additional advertising in the future.
Decrease or eliminate the advertising budget because it is not gaining the desired results.
Maintain the advertising budget in hopes that the marketing group will improve their performance or the next advertising will do better.
Increase the advertising budget to make sure we are above the critical mass level to make the advertising effective or spend more on content creation and advertising planning.
If satisfied with the results, leadership could . . .
If unsatisfied with the results, leadership could . . .

PowerPoint presentations, spreadsheets, and the output of analytics programs are all appropriate to present the findings and recommendations.

This content is provided to you freely by Ensign College.