Riffing off a great post by George on marketing measurement, here’s a very specific example of how Marketers have to think differently when they are dealing with interactive environments, from my days at HSN.
We spent about 5 years and $100 million dollars trying to prove offline media would drive new customer acquisition and sales. We tried everything. Billboards. TV. Radio. Newspapers. TV Guides – local, national, and cable. Flyers, Shoppers, FSI’s. Spot cable. All of it, in just about every combination you can think of.
Each time we did these tests, we set up control markets and looked for Incremental sales in the media markets versus those with no media, based on revenue per household. We found incremental sales in just about every case.
The problem was this: even though the media created incremental sales, these sales were never enough to pay back the media on a net basis, meaning (roughly) (Gross Margin - Campaign Cost) – Variable Overhead was negative – even when you took into account the LifeTime Value of a new customer. Even when you looked at the test markets versus control 3 months, 6 months, and 12 months later, for those who might be thinking about “Brand” or “Awareness”.
If you’re thinking perhaps the campaigns were weak or light on exposure, I offer you this: when the campaigns included coupons, the redemptions were absolutely huge. That’s good, right?
