Is your performance media really driving all of that performance?
VCCP's Aidan Mark shares 10 performance lenses that are positively influenced by brand building
E-commerce and performance marketing has been growing exponentially since at least the start of the millennia. With Covid-19 preventing many consumers from shopping in a physical retail environment, this shows no signs of slowing.
A whole industry has been built around the process. Advertisers and their agencies naturally spend a lot of time and effort optimising performance activities, and this is highly encouraged at the board level. After all, who doesn’t want tangible improvements on their marketing return on investment?
But this has led to a widespread issue that is negatively impacting our industry. In short, e-commerce advertisers often simplify complex customer journeys that real-world consumers go through. As part of this process, full credit for driving digital conversions is regularly given to the final digital touchpoint(s) that people interact with prior to buying online.
This is, of course, a drastic simplification of the customer journey for almost any given purchase decision. The knock-on effect also means that the ROI’s we are familiar with in performance marketing, are almost always wildly inaccurate and are therefore a poor basis for making optimisation and investment decisions.
At the heart of this issue is that the drivers of hard business outcomes are often misunderstood by those managing campaigns. The final digital touchpoints do not necessarily reflect the causal drivers behind why consumers choose to buy.
A large factor in this process is that e-commerce advertisers find it hard to accurately quantify the full benefit of brand building, which is in itself a driver. The net result in over-investment in performance channels, partially because these channels come with lots of reassuring, but over-stated metrics in terms of how they influence shopping behaviour.
The reality is that for e-commerce advertisers, many of the benefits of brand building are seen within digital performance activities. When brands are successfully developed, the brand creates a virtuous cycle of performance enhancements that are seen across lots of different metrics.
With this in mind, I wanted to share 10 performance lenses - some more quantifiable than others - that are positively influenced by brand building.
The easiest way of understanding these points is to compare a desirable brand (e.g. Amazon) with a competitor whose brand is less famous (e.g. 'NextdaydeliveryfromAidan.com’, which of course, does not exist).
1) Brand & Product Search Uplift
Famous and desirable brands have lots of searches for their brand and products. These keywords come at low cost and with high purchase intent. Keywords of this type are typically a large proportion of overall site traffic for desirable brands. In addition, due to the high intent behind the search term, these clicks come with unusually high conversion rates to sale when compared to other sources of traffic.
2) Direct site traffic
The cheapest source of traffic for any advertiser is a direct site visit. Visits like this incur zero marginal cost. In real terms, these site visits are from people typing in the brand's URL to the search bar and/or navigating to the site via a bookmarked page. Like brand search traffic, these visits convert far better than the average click, as the user is actively seeking the brand.
3) Attention & advertising recall
Consumers are far more likely to see, notice and understand communications that come from brands they know, like and comprehend. This gives famous brands a competitive advantage in delivering responsiveness from advertising, including (but not limited to) digital performance media in all its forms.
4) Click through rate uplift
Linked to point 3, a famous and desirable brand will have a greater click-through rate (CTR) when compared to less established brands. The result is a lower cost per click (CPC) on all forms of digital marketing, regardless of how the media is traded. This point even remains true when the user is demonstrating that they are brand-agnostic based on their search behaviour. By way of an example, someone searching for 'cheap sunglasses' is far more likely to click on an Amazon ad when compared to NextdaydeliveryfromAidan.com - who may also bid on the exact same keyword.
5) Quality score improvements
Linked to point 4, Google rewards famous brands. Google has many objectives, and one of them is to deliver a good user experience to people using the search platform. Brands have higher CTR's than their non-branded competitors. A high CTR leads Google to provide an improved 'quality score' which means the branded advertiser pays a lower CPC than their unbranded competitors. Brand enhancement, therefore, reduces the cost of all paid search traffic. As a general rule, Amazon will pay a lower CPC than my fictional retailer on all category related keywords.
6) SEO visibility
Google's preference for brands isn't just limited to its paid search offering. In Google and other search engines, natural search is effectively a popularity contest. Google wants to show search results to the websites that people are most likely to visit. As such, brand development enhances natural search visibility and further increases the amount of low-cost traffic available.
7) Loyalty & repeat customers
For many advertisers, repeat customers make up a large volume of total site traffic and sales. Repeat custom is far less prevalent for organisations that do not have a differentiated and valued brand. The result is that brands with loyal and repeat customers gain even more low-cost traffic without the need for paid media to deliver it. In fact, econometric modelling shows that famous e-commerce brands will typically have a sales and revenue 'baseline' in the region of 80-90% of total sales/revenue. This baseline is essentially the level of sales/revenue that would be achieved in the short term without any advertising investment. It is hugely important and intrinsically linked to how the brand is perceived.
8) Conversion rate to sale
The virtuous brand circle continues when traffic arrives on-site that understands the benefits of the brand. These audiences often have mentally bought your product before even visiting the website. Amazon and Domino's are brilliant examples of this. Both have conversion rates that are significantly above 'industry standard' for their categories, which gives these brands more leeway on the scale and cost of traffic they can afford to invest against.
9) Word of mouth effects
As consumers, we have never been exposed to more advertising messages than ever before in the history of humanity, and this trend shows no sign of stopping. The result is reduced advertising cut through and consumers increasingly ignoring ads. But what will still cut through for many ad avoiders is a word of mouth recommendation - we haven't stopped listening to our friends and family. When brands are desirable, they have a far greater word of mouth effect. This manifests itself in more sources of high intent / low-cost traffic as covered above.
10) Price sensitivity
Famous and desirable brands deliver reduced price sensitivity from consumers. This is ultimately how brands drive profit - they turn a commodity into something that they can sell at a price premium. Most performance advertisers assess value through the lens of volume only. This is problematic as the benefits of brand building are wide and seen across many different metrics - but reduced price sensitivity is undoubtedly one of the most important elements from a commercial perspective.
Finally, it would be remiss of me to not mention the one main downside of brand building. Brands essentially create irrational consumer behaviour. Yet irrational consumer behaviour around brand purchase decisions is highly profitable. This irrational benefit is incredibly hard to quantify in full, but it does exist.
If you only apply these 10 principles to assess the contribution that brand is having to your performance campaign, you will most definitely give a 'low ball' estimate of brand value. Yet even a low-ball estimate would still be a step in the right direction and would enable better decision making for most brands active in the performance space.
Yes it is important to optimise digital performance channels, but only if those optimisations are making a positive difference. As an industry, we need to get much better about understanding cause vs effect.
Aidan Mark is Group Planning Director and Head of Effectiveness, VCCP