Why Direct Response is the Key to Maximizing Ad ROI
Obsessively monitoring the metrics is very 2020, but it was also very 1990. Accountability in marketing seems to be reaching new heights these days, but direct response has been requiring high degrees of numerical performance for decades. In fact, the very idea of marketing accountability is why direct response was created in the first place. Now, startups from Away Travel and Warby Parker to behemoths like Apple and Procter & Gamble rely on direct response tactics as core marketing strategies, proving that direct response is both highly effective and has lasting impact.
The key advantage of direct response is what everyone is chasing but no one seems to have: attribution. DR companies were among the first in recognizing the value of metrics-driven marketing, putting them at an advantage when it comes to developing robust, multi-channel attribution models. Attribution, in turn, allows companies to innovate, design for their customers, develop advanced ad targeting, and improve ROI.
What is Direct Response, Anyway?
Direct response (DR) is any kind of marketing that is designed to elicit an immediate response from the consumer. Immediate responses allows marketers to trace a clear trail between sales and specific ads, or in other words, measure the effectiveness of each specific ad.
The classic example of a DR ad is an infomercial that asks viewers to “call now” at 11:29 p.m. Thus, any orders placed via calls that come in at 11:30 p.m. are directly attributable to that ad. Today, with so many advances in technology, direct response is a much wider category. DR ads can be seen on Facebook prompting you to “Buy Now”, connected TV asking you to “Visit awaytravel.com”, or on any number of other channels like Pinterest, Spotify, in-app games, Google, online grocers, emails, radio, and more.
The defining factor of DR is the call-to-action (CTA), where the ad asks that viewers click, call, visit, scan, share or buy. No longer just yell-and-sell gadget ads on traditional TV, today DR represents a $100B industry and shapes expectations on proving the value of each ad dollar spent.
Why Metrics Matter
Direct response isn’t just viable, it’s vital. We live in a time where users have fragmented platforms and attention, but it is also easier than ever to collect and access data. According to a Google study, 90% of marketers say that understanding their users’ journeys across all channels and devices is critical to success. Data has become the most important currency for organizations.
With the advent of digital channels, brands are able to measure quickly how consumers react to messaging. This in turn makes them able to be more nimble to what messaging and products are resonating with their target audience. Measuring response to messaging enables campaigns to scale quickly.
However, the challenge that brands face is knowing how to shift through the volumes of data available in order to find what is truly driving their business. In a Forrester Consulting study, 70% of respondents said that poor data has a detrimental effect on their campaigns. Brands need to not only have access data, but be able to verify its quality. Properly run direct response campaigns cut down the time it takes to measure success.
Channel Warfare: It’s Not Just TV
With dozens of new channels to engage with customers developed in the past two decades, technology has opened up significant opportunities to use DR techniques in new ways. In fact, it is practically built in to most digital advertising platforms these days.
Companies with extremely strong omnichannel customer engagement retain on average 89% of their customers, compared to 33% for companies with weak omnichannel customer engagement (Aberdeen Group), and data suggests it takes at least 6-8 touch points with a brand for consumers to make a purchase (Salesforce). Multi-channel marketing is necessary, but Facebook requires a different strategy than Twitter, which requires a different strategy than in-app ads, which is different than TV, and so on. However, all can use DR tactics to their advantage.
As explained by Jon Nathanson, over at Priceonomics, DR ads are typically built around the following formula:
1. Create Awareness
Show the product, show its use, and establish a relatable context for that use.
2. Create Need
Explain why the product is a must-have.
3. Create Urgency
Incentivize consumers to buy NOW (instead of letting them wait, and potentially losing them entirely).
4. Evaluate Choices
Compare the product to existing, inferior solutions the viewer probably already uses.
5. Resolve Final Risk
Make the viewer comfortable that if something goes wrong, they’ll be covered.
6. Call to action
Tell the consumer exactly what you want them to do next.
While not all brands will choose to use every one of these tactics, brands like hims, Curology, hello fresh, Dollar Shave Club, Chewy.com and hundreds of other highly-touted, industry-disrupting up and comer D2C brands are proving each and every one has a place in 2020.
Using DR principles like measuring the value of each ad, and the marketing strategies outlined above works across all marketing channels. As attribution becomes more advanced, and companies are able to gather more data about their customers from their ads, figuring out which tactics works where, and with which customers, at which point in the customer journey will become even more vital. That’s where direct response can help.
Following the Numbers to the Future
The accountability inherent in the DR model encourages advertisers to track ROI, CTR, impression share, video views and other metrics about each ad that is run. Tracking changes in these numbers over time, and in comparison to other campaigns allows marketers to assess the effectiveness of their ads, and give such insights as when to change creative, which interests are correlated with our products, what lifestyle aspects speak to core consumers, which colors work best, what length of video is appropriate, and what info consumers want to know about the products before they buy.
The age of relying on one person’s impression of a market and vague ideas of what the market wants based off personal experience are over. Direct response ads have provided data to make market-proven decisions possible for over 30 years.
The push for better informed, numbers-based decision making is a huge leap forward in marketing, but cross-channel attribution is by no means an easy, set-in-stone, or one-size-fits all task. Marketing touch points and customer journeys are only getting more complex, making the need to understand which of your ads work and why they work all the more important. Direct response style attribution will determine which brands reach their full potential and which brands get left by the wayside in the years to come.
Are you getting maximum return on your ad spend? Contact us today to get a full audit.