Thursday, August 04, 2011

73% of chief executives feel that their CMOs' key metrics "hardly relate to or mean anything for the company's P&L.”

The above was from a recent study of CEOs by the Fournaise Marketing Group.

Not encouraging, is it?

But it also raises an interesting question. What kind of metrics do relate to a company’s P&L?

Sales, obviously.

But, that metric comes in a little late in the game, doesn’t it.

So the question becomes, what metric is the best of indicator of sales before the actual sale takes place?

It used to be impressions. The primary reason being, that’s all we had.

Some say click-through rates. But the circle of proponents of CTR is getting smaller and smaller.

How about view duration?

Does it matter if a viewer watches all of a commercial or only a tenth of a commercial? Can view duration serve as a proxy for sales?

Logic would indicate yes. If 60 seconds of a sixty-second spot are watched, the chances of the selling message working is greater than if only ten seconds of a sixty-second commercial is watched.

But the main reason why view duration works as a key metric is because the advertiser is dealing with more than one P&L. There is an overall marketing budget P&L that is evaluated through sales. But there is also a production budget P&L that is evaluated through…?

Exactly.

If a client pays for sixty seconds to be produced, and only ten seconds are consumed by the viewer, that is not a very good return on investment for production dollars spent.

When it comes to production dollars, the higher the return on involvement on the part of the viewer, the higher the return on investment for the advertiser.

The way to increase an advertiser’s overall marketing P&L is to increase the individual P&L’s that make it up.

Which changes the way we look at which metrics mean something.

And, which don’t.

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