The New CMO – Cross Media Optimization

Last week, I spoke at the WebTrends Engage Conference in Las Vegas, NV.  This entry represents a refutation of the “What Happens in Vegas Stays in Vegas” mantra – I do want to share some presentation insights and make some suggestions to customers about how Covario will be approaching this concept of Cross Media Optimization through our technology and consulting practices in the next year.  Consider this an overview of that presentation.

The global economy is forcing a new discipline on large advertisers – one that is possible to exploit given the realities of interactive marketing.  This discipline is the result of media budgets decreasing by somewhere between 10-15% y-o-y for many large advertisers, with no increase in headcount to do additional work.  And not just in advertising, but across the board in most companies, ROI models require 90 day payback periods as no one is forecasting into 2H’09.  Yet result forecasts are not staying flat – 10-15% improvements in advertising program performance are still being required through 2009-2010.

This seems impossible, but pull in the results of studies that have been done in the past year regarding cross-channel optimization programs. Take search for example.  The studies conducted by Covario (and others*) regarding ways to improve paid search spending results by optimizing based on natural search results suggest that ROAS on average PPC programs can be improved by 15-20%.

Take display and search.  The studies conducted by Covario suggest that looking at the conversion rates for a structured SEM campaign improve ~12-15% if the searchers were exposed to a display ad for the same product within 30 days preceding  conversion.  Same for online and offline.  In two studies done by Covario in the past year – one regarding a Super Bowl commercial run by a customer, and the other a new TV campaign begun last summer – the normalized results of the search conversions (all other factors being equal) show a 25% increase in conversions for product-related search programs and a 15% reduction in CPC within 3 weeks of the launch of the TV ad campaign.

Study after study shows that – budgets being equal – campaigns run in a more coordinated way lead to an improvement in results.  And the potential improvements are not marginal.  If the results were 2-3% improvements in performance online, then the work required to coordinate would not be worth the investment.  But ~20% result improvements require attention.

To take advantage of this CMO concept, we suggest that organizations engage in a 5-step Media Management Maturity Model (4M).  Let me explain:

·        Stage 1 – Random Acts of Advertising

o  All companies start at Stage 1. This usually means internal, localized, and uncoordinated programs that spring up regionally or in a particular BU – based on individual experience – with a media channel or marketing concept.  For example, many social media programs are currently in this stage as organizations engage in Random Acts of Blogging.

·        Stage 2 – Building Media Specific Process

o  Advertisers, either internally or through first experiences with agencies, build processes to have suitable programs run for offline (TV, Radio, Print), direct marketing (email, direct mail), and online (initial PPC and SEO programs, display ads).

·        Stage 3 – Local Optimization of Media Specific Processes

o  This is where we see many of our clients in the interactive advertising space. Best in class processes have been developed, leveraging either internal resources or best in class agencies.  Best practices are developed and the metrics of measurement and monitoring are well developed – but within a single media channel (search is well optimized, but not necessarily its interworking with Display).

·        Stage 4 – Developing the Centers of Excellence/Centralization

o  Organizations realize that, particularly in digital advertising, that centralization of data and management is key in driving additional performance.  Dashboard projects spring up – to consolidate data globally within a channel and across channels – to set the stage for identifying the cross media opportunities.

·        Stage 5 – Cross Media Optimization

o  The organization has developed advanced processes for testing the interaction of various channels, has metrics of value defined consistently across media types, so that cross media budgeting and planning can take place seamlessly.

The concept of Maturity Models is something that is old hat in IT.  It appears the time has come to apply the concept to Advertising. This model provides a step-by-step way for organizations to meet the objectives laid out above – driving 15% improvement for the same investments – through improved use of testing, data and coordination of programs.

Most large advertisers are in Stage 2-3 – however, I am starting to see many organizations executing on Stage 4.  It is becoming a fact that agencies must be able to provide cross media dashboards to compete (for the record, they are not there yet).  The concept of building Digital Centers of Excellence is becoming a reality at many large advertisers. The consensus is building that these techniques are necessary to meet the new economic reality.

The talk ended with a discussion of where the money to do this work must come from.  I can’t say that I have a great answer to this.  It is likely that this work will come out of the fees to the agencies – if agencies are in the picture.  This is part of the ongoing commoditization of the agency and media buying world.  Being able to drive cross media tests to determine the relationships between media channels, and the resulting media mix modeling that follows is Ground Zero for agency work.

There is a catalyst in the market, automation of data integration, that is necessary to execute CMO (cross media optimization) – so agencies either have to offer these dashboard and data consolidation capabilities, or advertisers will find others (like Covario) to do this for them.  But every company is different.

One other key point from the talk. One of the most important aspects of the CMO is the need to have accurate data from the web analytics (WA) environment. However, we have seen an incredible underinvestment in WA systems in many of our clients.  The WA data is absolutely critical, as the dependent variable – the results on the site – are derived from the WA environment.  Without the WA system appropriately configured, much of the process to determine the inter-optimization opportunities collapse into confused analysis from junk data.

Covario is doing a lot of work in the area of CMO and testing around interactive marketing.  Most of it is being done by Dr. Matthias Blume, our Chief Analytics Officer.  If any customers are interested in discussing how we might help, let us know.

Regardless, this is a key area and a solid approach for how to deal with the financial pressures being applied to advertising programs in large advertisers.  The audience at the WebTrends conference asked many good questions on the topic.  It is clearly on the minds of many of their customers.

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