Understanding DR Media Performance Drivers and Leakages

It’s fair to say that much of the direct response industry revolves around media; it’s both the most visible part of the direct response marketing process and a strategic focus that drives brand awareness, brand preference, and revenue.

Media is also a very visible and substantial element of the campaign P&L, as it can account for 30% to 50% or more of a marketer’s cost of goods sold. In fact, media buys are the number one driver of revenue growth and profit… or risk, which can manifest as value leakage, poor campaign performance, or even loss.

Media spend and performance
There are many factors in determining what type of media to employ, be it print, online or broadcast. The overall campaign strategy, product and media type play an important role in how much money is allocated to the channel, which also factors-in the opportunity within the channel and projected return on investment. Many appreciate the significant advantage of online media in that the response mechanisms are detailed and immediate, whereas print media is often quite slow and may take weeks or months to assess. But with most direct response campaigns, broadcast media plays the most significant role in driving both brand awareness and customer traffic, and it does so within a short window of time – as well as being responsible for the bulk of the typical campaign cost.

Understanding the Drivers
The core drivers of media selection often revolve around the type of product or service, the audience, and historical factors. At KPI we’ve developed a proprietary analysis and assessment tool, Insight Engine™, to help us in this process; Insight Engine enables analysis of historical campaign information from years of results, allowing us to cross-tab audience, product, segment and other predictive attributes to anticipate customer behavior and campaign performance against an array of parameters.

However, at the core of our calculations is the business and campaign financial pro forma, including return on investment targets (MER/Media Efficiency Ratio and CPO/Cost Per Order), modeling from previous campaigns with similar attributes, and a campaign-specific business process layer.

Understanding the Details – The Supporting Layer
The campaign-specific business process layer then allows us to precisely track breakeven performance throughout the media process, with indicators that are present throughout the supporting layer of services. This layer includes call centers, fulfillment centers, shipping, merchant processing, royalties, and order management system charges, ensuring that quality objectives and volume goals are well served.

Looking For The Leakage
The major areas of media-related value leakage, though they show up in many places and forms (more about that in the next post), are the following:

A media-buying model (and relationship) that is not built to manage outlet preemption, poor performing media and other critical factors.
Media buyers that are compensated on media purchased versus time and materials and/or results.
Poor pre-campaign planning and analysis of historical factors and market attributes.
Media cost that is too high to achieve the target ROI – expressed as Media Efficiency Ratio (MER) or Cost per Order (CPO).
Failure to account for market factors that temporarily drive costs higher or cause deterioration of response, thus changing the campaign strategy.
Failure to maintain active monitoring and assessment of the media campaign throughout the campaign and supporting layer of services, including failure to build and manage critical key productivity indicators (KPIs) as part of the model.
Misalignment of media format (such as HD versus SD) with the creative/brand platform, reproduction and distribution.
Poor sales conversion rates that may be symptomatic of a mismatch between the creative process, and the needs of the target audience.