Thursday, April 27, 2006

Talkback: Time to set a benchmark for ad value

By Keith Norris

Last week, the Advertising Standards Authority released the industry revenue figures for 2005, which showed that turnover increased by a healthy 7.4 per cent to $2.3 billion.

But are we measuring the right thing? Is the cost of delivering our commercial advertising giving us the full picture?

I think not. We marketers, and our agencies, are well aware of the cost factor. In fact, we're almost obsessive about advertising spend but we seem to neglect the other side of the ledger - the return on our investment.

A company's balance sheet reflects the overall health of the organisation. The company accounts show the revenue generated and the expenses incurred in generating that revenue. We need to apply the same philosophy.

I get increasingly frustrated by the advertising rankings published in our trade magazines showing who spent what on which media.

These tables appear to make heroes of the biggest spenders. It's rather like awarding the "car of the year" title to the biggest gas-guzzler.

As professional marketers, we must commit ourselves to improving the measurability of our marketing spend. Even the authority's figures only reflect the ratecard placement costs of our advertising.

Mailbox spend, for instance, at about $90 million represents only the physical delivery cost of advertising, whereas the value to the economy, including printing and production costs, is nearer $700 million.

This makes the mailbox a much more significant advertising medium than magazines and radio when taking into account all aspects of delivering the message.

Let's also examine the digital media. None can doubt the increasing importance of the internet but the authority's numbers only tell part of the story as they too reflect only the direct placement costs of website ads.

They don't include, for instance, email campaigns which, in the business-to-business environment in particular, are a huge growth area.

I don't mean to knock the value of the ASA figures. Any stats which can reflect market trends are useful.

My real beef is that as marketers we are information poor in New Zealand. We have no numbers that indicate the real value of advertising to the economy.

In the United States, the Direct Marketing Association produces an annual Economic Impact Report that measures direct marketing and total advertising expenditures across all the major media.

It then extrapolates this into sales figures and the impact of the revenue generated on things such as industry and employment growth, enabling US marketers to benchmark themselves against the industry norms.

Better than that, it means they have the ammunition to convince their corporate colleagues of the value of advertising.

The marketing community here is mature enough to collaborate to produce similar meaningful information.

If we can afford to spend between $2 billion and $3 billion on delivering our messages, surely we can set aside a fraction of that to measure its effectiveness.

This would be an ideal opportunity for marketers, advertisers, agencies and media to collaborate and generate data which illustrates the importance of advertising to the whole economy.

Are you up for it?

* Keith Norris is chief executive of the Marketing Association.

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