Warc, 9 September 2014
LONDON: Brand size and creative execution have become increasingly important factors in driving advertising profitability in recent years, producing a profit multiplier of up to 18.
When Paul Dyson of Data2Decisions first looked at this area in 2006, he argued that marketers were guilty of setting unrealistic targets for brand RoI or of allocating budgets to smaller brands. This missed the point that brand size could achieve a multiplier of 16 on advertising return, while the comparable figure for creative execution was 10.
Revisiting the subject in the September issue of Admap, he found that the profit multiplier effect had risen to 18 for brand size and share and to 12 for creative.
This was largely a consequence of the greater internationalisation of brands while a series of mergers and acquisitions had produced larger brand portfolios, with an attendant halo effect surrounding creative.
The intervening period also witnessed explosive growth in digital advertising, which Dyson suggested had made the science of budget allocation across channels and territories more important as well.
In fact, budget-setting across geographies appeared as a new entry in his updated top ten drivers of advertising profitability, with an average multiplier of around five.
"We believe the opportunity to impact return on global budgets via allocation across geographies is significant and bigger than budget setting within a country or within a brand alone," Dyson said.
While was the area where budget-setting could have the greatest impact, doing the same across portfolios achieved a profit multiplier of three and budget-setting across variants a multiplier of 1.7.
Further, the scale of change in the online world and the fragmentation of media channels – Dyson reminded readers that, at the time of his initial assessment, the iPhone had not been launched and Twitter was just starting out – had resulted in major changes in how media agencies operated.
Media plans were no longer restricted to a handful of channels as agencies adopted a 'connected planning' approach. Consequently, Dyson had increased the multiplier for multimedia campaigns from 1.1 to 2.5.
Advertising might have become more complex, but Dyson argued that marketers also had more opportunity for control and a greater understanding of how to make a difference and so maximise their payback from advertising.
Data sourced from Admap