Three Methods for Measuring the Effectiveness of Online Advertising
An increasing number of consumers employ the internet to research products and prices before deciding to make a purchase. Online advertising is important to business owners. Small businesses with less than $5 million in revenue are advised by the U.S. Small Business Administration to spend approximately seven to eight percent of revenues for total marketing endeavors. Major libraries and most universities with business schools carry a copy of the Schonfield Survey of Advertising Ratios and Budgets. This annual report contains the advertising budget of companies listed by industry. The information may be helpful for determining an advertising budget. Determining where the advertising budget should be spent is equally important. There are three major methods for measuring the effectiveness of online advertising.
- Direct Response Advertising: Online display advertisement is a form of direct response advertisement. Pay per click is a type of direct response advertising measurement that is easy to gauge. This strategy is designed to evoke an immediate response with a call to action. The call to action may be in the form of a deadline, sales promotion or coupon. Advertisements that are not a good return on investment may be dropped.
- Sales Lift: An increase in sales due to an advertising promotion is known as sales lift. Businesses must increase sales to prosper financially. Repeat business accounts for 41% of online revenue; however, represents only 8% of website traffic. Returning customers generally purchase up to three times additional merchandise. Measuring overall growth in sales is a superior method for an accurate indication of gauging the benefits of sales lift.
- Brand Lift: In a brand advertising campaign, measuring the primary marketing objectives via percentages of increase is known as brand lift. Brand lift measures the degree that consumer perception shifts due to advertising. Brand lift encompasses attitudes, awareness, favorability, intent and actual purchases. Click through rates is immaterial for measuring the efficiency of brand advertising. Optimizing brand lift metrics is the most valuable method for determining the effectiveness of a brand advertising campaign.
*Photo courtesy of Measured Curves by Greenzowie at Flickr’s Creative Commons.