Testing Advertising Metrics

KISSmetrics has a good blog post introducing 8 fundamental principles of profitable direct response advertising and how they apply to online advertising. If you’re in business or thinking about being in business the entire post is a must read! But…

If you only took away 1 principle of direct response advertising:

TEST EVERYTHING!

Knowing nothing else about advertising, if you followed the principle of testing every component of your advertising, you would eventually learn all the other principles anyway. The ability to test is what makes online advertising so effective.

Over a century before the internet, testing is also what made direct response print advertising effective. Direct Response advertising, for the unaware is any advertising where the prospective customer is directed to respond to the advertising in a specific way. In cave-man days this might mean filling out a form and mailing it in, clipping a coupon and bringing it to a store, or calling a telephone number for more information.

What savvy direct response marketers realized was that they had much more control over their advertising results when they tested and tracked their results. The one way to test for ad effectiveness was to deliver a CTA (call to action) that directed the customer to act in a way where their response could be measured. Therefore, if they paid for ten thousand ad placements in which they told their customers to mail in a form for more information, and they received 200 forms in the mail they now knew their response rate for that specific advertisement at that time, to that market was 2% (200 / 10,000).

They could then test different ad headlines, body copy, graphics, and CTAs. If they changed a headline and their response rate improved .3% they had proof it was a better headline and would start testing that ad in larger circulation while testing newer ads in smaller circulation.

The reason the internet is such a disruptive technology in advertising is because online advertising is direct response advertising on steroids. It offers instant feedback, and the opportunity to test countless metrics in highly targeted market segments.

As you learn about various online advertising platforms, frankly, all the charts, graphs and data can be a little overwhelming. Which metrics matter more? KISSmetrics reminds us:

“Many marketers are unduly concerned with ‘building brand recognition’, ‘increasing customer awareness’, ‘leveraging social media’ and all these other fancy marketing techniques...If you haven’t got a clear idea of how a given marketing technique will help you make more sales, don’t use it. If you’re already using it, stop immediately. On the other hand, if you do have a clear idea but lack any way to measure your success, find a way before continuing.”

In short, whatever you measure, make sure it translates into sales!

For example, you’ll hear a lot of talk in online advertising about CTR (Click-thru-rate). CTR is the percentage of people who were showed an advertisement that also clicked on it. Obviously, if you’re advertising widgets and someone clicks on your ad and is taken to your online store, then that can translate to a sale. There is a necessary relationship between the customer clicking the ad and eventually buying from you, so if you improved your CTR then you should increase your sales, so you should measure your CTR.

Another metric you’ll hear a lot about in online and offline advertising is CR (Conversion Rate). CR is the percentage of prospects who take a specific action. At its simplest CR measures involvement through activity. But most often that activity is buying something, though it doesn't necessarily have to be. Again, whatever it is it should naturally translate into an eventual sale, otherwise it’s unnecessary.

Keeping these core principles in mind in all your advertising will help you take measurable advantage of the array of modern information technology online designed to help you get and keep more customers.