Creative is biggest profitability lever, brand size top factor

Updated research into the factors affecting advertising profitability finds that brand size and creative quality have grown in importance as online life has matured.

Why it matters

Paul Dyson, founder of Accelero consulting, emphasised that creativity is still “by some way” the main lever at a marketer’s disposal, during a recent talk at Thinkbox, the marketing body for commercial TV in the UK. 

Topline: brand size still matters most (even more so than ten years ago). This echoes much of the research across the industry, indicating the importance of brand-building advertising activity, reframed by James Hurman in a WARC whitepaper as “future demand”, from which the brand can then sustainably convert, especially in an e-commerce context.

Effectively, the better known you become, the more efficient your marketing activity will become.

Method

Dyson’s evidence comes from an update to figures from Data2Decisions, which he founded before selling the business to Dentsu, published on WARC back in 2014. The new figures show a similar picture but with all of the top three factors now even more important.

The work is based on case studies of 28,000 global campaigns (of which around 7,000 were from the UK) judged against a synthesis of ROI measures including profit ROI and revenue ROI, to understand the factors that affect profitability. Of course, there are significant limitations to thinking about advertising in terms of ROI, given that advertising also adheres to the economic phenomenon of diminishing returns: a smaller budget will tend to deliver a higher ROI.

What you need to know

• At the top, brand size continues to be the most important indicator of advertising profitability, up to 20x from 2014’s 16x, mostly because a big brand means it is well known – this impact is visible across a swath of other similar studies including the IPA awards and the ARC Database. Arguably, with the internet maturing, this datapoint indicates that a significant brand is now even more important as media continues to fracture.
  
  
• Creative, however, is the most important actionable lever for marketers right now and has grown to a 12x multiplier versus 2014’s 10x. To explore this effect beyond brand size, Dyson contrasts 11 different campaigns from the same brand and shows how the best-performing campaign had an ROI 24x that of the worst-performing campaign. For more on creative impact on profit ROI, Kantar and WARC research from February also indicate this link.
  
  
• The third and fourth most important factors concern budget allocation. Budget, along with time in market and number of channels, forms a critical aspect of the Creative Commitment idea that maximises creative output and its commercial impact.

SPT