Relevance counts

“Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”

Which ads motivate consumers to buy? In a recent study, Evert de Haan, Thorsten Wiesel, and Koen Pauwels evaluated a wide range of new and traditional advertising methods: e-mail, TV, radio, product placement, editorials and public relations, paid search, portals, price comparison, referrals, and retargeting, to find out how each form of advertising affects average revenue and drives users through the online purchase funnel.

Advertising activities were classified on different dimensions: firm initiated versus customer initiated, content integrated versus content separated, the customer’s stage in the website purchase funnel, and mass versus personalized advertising. The team compared each ad form’s elasticity; that is, the percentage revenue gain from increasing ad expenditures by 1 percent. They also calculated the effect of advertising on users in each stage of the retailer’s website funnel.

Overall, customer-initiated contacts (CICs) were 26.7 times more sales effective than firm-initiated contacts (FICs) in their data set. Further, content-integrated advertising was about nine times more sales effective than content-separated advertising activities.

But the big winner was the combination of content-integrated advertising that was initiated by the customer. Content-integrated CICs—ads on Web portals, price comparison sites, and referral sites—were more effective in attracting people to the next stages in the funnel, increasing product-specific, shopping basket and checkout page sessions. This, in turn, had a greater impact on revenue: a 1% marketing budget increase in content-integrated CICs led to, on average, a .133% increase in revenue, compared to a 0.027% gain for content-separated CICs and an almost zero increase for FICs.

Unsurprisingly, content-integrated customer initiated contact – presumably relevant content consistent with information that consumers are voluntarily searching for – are more effective in generating higher average returns to the marketing budget. Time to reconsider that Super Bowl budget.

(via MSI)

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