Performance marketing effectiveness needs to get better

Marketing effectiveness is below pre-pandemic levels for the second year running, according to the Data & Marketing Association, with performance marketing effectiveness falling sharply, even as brand marketing effectiveness has improved.

Why it matters

The current economic climate has meant that marketing budgets are under more pressure than ever, with a greater burden on CMOs to prove the impact of their spend. This is leading to an ever-increasing demand to articulate short-term business outcomes at the expense of focusing on what drives long-term sustainable business growth.

Takeaways

The CMO Measurement Toolkit from the DMA highlights five key points for marketers: 

• Focus on measuring what matters to your business: Linking marketing spend to business outcomes (eg ROI, profit growth, and long-term customer loyalty) helps to sell the organisational value of marketing when budgets are under pressure.
• Assess which metrics are linked to business outcomes: Ad volume, efficiency and engagement, along with Net Promoter Score and Retention Rate growth, were found to be strong business effectiveness drivers.
• Contextualise marketing performance against benchmarks: Make like-for-like comparisons with relevant industry benchmarks when setting campaign KPIs.
• Stimulate future demand through brand building: Generating customer response to marketing comms is harder when household budgets are under severe pressure. Brand activity can itself drive sales directly and have a halo effect on performance / response marketing in the short term.
• Rediscover the lost art of creativity to drive campaign response: Performance marketing effects have declined by 62% over the past two years in the face of subdued consumer demand. Creativity is being severely underutilised in the performance marketing space. This is a big opportunity for advertisers aiming to arrest the decline in response effectiveness.

Key quote

“In a muted economic environment, there is only so much response that you can sweat out of consumers with your direct response advertising … [but] brand campaigns are getting more effective – those who are investing in them are getting better at doing them” – Ian Gibbs, insight and planning director at the DMA.

Read more in How brands can address a decline in marketing effectiveness.