A lot of heads turned when P&G, one of the world’s largest adver­tis­ers with a mar­ket­ing bud­get of $10 bil­lion annu­ally, announced the lay­off of 1,600 mar­ket­ing peo­ple. Bob McDon­ald, CEO of P&G, said, “In the dig­i­tal space, with things like Face­book and Google and oth­ers, we find that return on invest­ment of the adver­tis­ing when prop­erly designed, when the big idea is there, can be much more effi­cient.”  He also cited the Old Spice cam­paign as an exam­ple of a highly cost effec­tive and suc­cess­ful campaign.

Given the cur­rent debate over social ROI, we find his state­ments very inter­est­ing and worth explor­ing.  The fol­low­ing themes emerge when one con­sid­ers the lay­offs in a broader perspective:

Social ROI is more than direct response:  Part of the rea­son some mar­keters con­tend that social media is not effec­tive is because they view it from solely a direct response lens. For bet­ter or for worse, the search engines have spoiled us into think­ing that because one can mea­sure met­rics in online mar­ket­ing, it can be held fully account­able in terms of profit and loss in a very short time inter­val (even a day).  Fur­ther, as many direct response mar­keters start to man­age Face­book cam­paigns they view them with this same lens and quickly come to the con­clu­sion that their cam­paigns are not effective.

How­ever, this is a very nar­row per­spec­tive and often misses the big­ger pic­ture. Brand mar­keters like P&G and Coca Cola have known for decades that reach­ing out directly to audi­ences builds loy­alty and a propen­sity to buy their prod­ucts over time. Mea­sure­ment of the effi­cacy of these cam­paigns is tricky and requires patience. How­ever, in the case of social media the ROI can be mea­sured if done right. For the brands that we man­age we have seen anec­do­tal evi­dence show­ing when brands inter­act with their fans they see increased offline store sales. We have also seen evi­dence of the aver­age order value of prod­ucts being higher for con­sumers who have inter­acted with a brand’s Face­book app.  While the evi­dence is pre­lim­i­nary, we remain fairly con­fi­dent that this is part of a broader hypoth­e­sis — one that makes both intu­itive and math­e­mat­i­cal sense. When you reach out to con­sumers in a mean­ing­ful way they are more likely to buy your product.

Peo­ple are mov­ing away from offline to online media:  Media con­sump­tion is mov­ing away from print and TV to online. This should come as no sur­prise to any­one. Face­book is not only see­ing fan growth, but the aver­age fan is spend­ing more time on Face­book. YouTube, Hulu and related sites are also see­ing increased usage. The obvi­ous con­clu­sion is to move media dol­lars away from offline to online sources. This share shift is well underway.

There is also one more key impli­ca­tion. As the media dol­lars move online, adver­tis­ers will be able to gather more data than ever on the effi­cacy of their cam­paigns. Not just search, social and mobile, but also video. The smarter plat­forms will then pro­vide mar­keters with sophis­ti­cated media buy­ing options such as seg­men­ta­tion, real-time auc­tion­ing of media spots, demo­graphic infor­ma­tion, and cross chan­nel insights to help mar­keters. These devel­op­ments will only make media buy­ing more effective.

The age of the Math Men: Chris Moore from Red­point Ven­tures recently wrote that we live in the era of the Math Men. I couldn’t agree more. With the sheer vol­ume of data that mar­keters are being bom­barded with, there is an urgent need for sta­tis­ti­cians, sci­en­tists and ana­lysts to be able to crunch the data, come up with mean­ing­ful insights and action them in near real-time. This would be impos­si­ble were it not for sophis­ti­cated algo­rithms that do a lot of the heavy lift­ing to ease the bur­den on the mar­ket­ing man­ager.  Does this mean the death or cre­ativ­ity in mar­ket­ing?  Of course not. In fact, I would say that there is more need than ever for cre­ative folks. There are two rea­sons for this: (1) Most non-math folk don’t real­ize this, but algo­rithm devel­op­ment is an extremely cre­ative process (take it from a guy who wrote algo­rithms for years). Find­ing the right math­e­mat­i­cal para­me­ters and then fus­ing it with busi­ness insights can make all the dif­fer­ence between an algo­rithm that closes your busi­ness or one that dri­ves ROI at scale. (2) Algo­rithms and math can drive your mar­ket­ing cam­paign to opti­mal per­for­mance, but it can’t cre­ate an inter­est­ing and com­pelling cam­paign for you. In other words, an algo­rithm could have found the best way to adver­tise the Old Spice cam­paign on Face­book, but it still needed some very cre­ative peo­ple to come up with the con­cept and then exe­cute it. One should view math and algo­rith­mic tech­nolo­gies as extremely effec­tive pro­duc­tiv­ity tools that free time for us to do even more cre­ative marketing.

I see P&G’s shift in focus as part of a broader trend – a shift in media mix from a less mea­sure­able offline world to a more mea­sure­able, but frag­mented online world where inte­grated track­ing, mea­sure­ment and opti­miza­tion tech­nolo­gies are vital. We are ready!

Dr Sid­dharth shah
Direc­tor, Busi­ness Ana­lyt­ics