Insider’s Corner with Peter Rosenwald: Awareness or Profits?

Data-driven marketing guru breaks down awareness vs. profits, turning awareness into revenue, the importance of ROMI, and more!

Insider’s Corner is a bimonthly blog written exclusively for Infocore by data-driven marketing guru, Peter J. Rosenwald.

Awareness or Profits?

It is not a ‘chicken and egg’ question of which comes first or which should be top of mind.

But the question of the relative importance of ‘awareness’ and ‘profitability’ (and as can be seen in the graph below) and other important attributes, is one which must continually capture our attention, even keep us awake at night.

Turning Awareness Into Revenue

In research undertaken recently by the CMO Club and published in MediaDailyNews, editor Joe Mandese wrote: “More than half (51%) of the executives cited awareness as their most important metric, followed by sales/revenues (32%) and media ROI (29%).”

It appears that these marketing bosses share the traditional Mad Men view that ‘awareness’ is the key KPI for judging the effectiveness of advertising. What exactly is the measurement of ‘Media ROI’ has been left to our imaginations.

But does all this really make sense? Or is it little more than the traditional knee jerk reaction of advertisers and their agencies, a reaction whose time has passed?

We all know that without awareness, the customer journey to profitable purchase would never begin. How much awareness you wish for is at least a significant driver of how much you spend to reach how many eyeballs? Whether on commission or not, agency compensation is tied in one way or another to total advertising spend and in my experience, the more advertising spend, the healthier the agency’s bottom line.

Admittedly, as more and more companies opt to build and use internal resources to take over the tasks of turning awareness into revenue, the only metric left on which to judge the agency performance is how much awareness for how much money.

The Importance of ROMI

Nonetheless it’s worth asking if marketers and their agencies were judged more on the quantum of revenue and/or profit generated (the ROMI: Return On Marketing Investment); would their recommended strategies and tactics be the same?

There are two competing answers, the product of two different disciplines.

Perhaps it is an over-simplification, but traditional brand marketing normally starts with the definition of a prospect audience and the most efficient ways to reach them plus the frequency of contact. The first objective is normally to create or enhance awareness of your marketing message. But awareness is just awareness, an expensive luxury if it doesn’t drive measurable revenue and profits.

That’s why it is a bit surprising that this group of CMOs puts ‘awareness’ at the top of their priorities when we all know that ‘awareness’ can be positive or negative depending upon the content of the messages. Do something really outrageous like causing a wardrobe malfunction on national television or use a famous celebrity endorser (or both) and there is no doubt you’ll increase awareness. Your message may even go viral but that doesn’t mean it will lead to increased sales and profit, the ultimate bottom line.

A Challenge Worth Pursuing

The core discipline of direct and data-driven marketers demands accountable sales or leads at a unit cost less than the ‘allowable’ (the amount you can afford to spend per customer for marketing and still deliver a pre-determined profit or contribution). It looks upon awareness as absolutely necessary and a primary benefit but not as the leading metric.

As we know, technology allows the aggressive marketer to focus on individual customers and prospects and migrates more and more of them towards positive interaction between seller and buyer. That’s why engagement, satisfaction and conversion (which taken together account for only 29% from the CMO Club survey participants), would appear to deserve greater prominence.

The journey from awareness to purchase is often a long and arduous one and the costs of the later stages of that journey can far outweigh the cost of building awareness. How ever the marketing functions are organized, external agencies and/or internal units, the most successful are true partnerships with the ultimate metric of success, the ROMI. It may be difficult (better: it is always difficult) to allocate how much of the final success (or failure) gets credited to each component of the total marketing effort but that’s a challenge worth pursuing.

Your comments are welcome below, or contact me directly at insiderscorner@infocore.com.