About 50% of marketers today are not spending enough to extract maximum return on investment (ROI), according to an ROI report by global marketing research firm Nielsen. The report identifies gaps in marketers’ budgets, channels and media strategies that are negatively impacting ROI in media plans. It highlights a ‘50-50-50 Gap’, where, while 50% of media plans are underinvested by a median of 50%, ROI can be improved by 50% with the ideal budget. While sometimes a poor ROI might cause brands to pull back on spending, the spend often needs to be higher to break through and drive returns. Nielsen recommends that the media spend needs to be between 1% and 9% of a brand’s revenue to stay competitive.
Underinvestment was one of the key lessons that the research agency uncovered, based on analysis of close to 1,50,000 observations of marketing ROI and its database of client-supplied media plans. Beyond the budgeting observations, the global report also offers certain key insights to deliver higher ROI across multiple marketing areas.
The first recommendation is in full-funnel marketing. The research firm suggests that to improve ROI, brands should pursue a balanced strategy for both upper and lower-funnel initiatives. Adding upper-funnel marketing to existing lower and mid-funnel marketing can grow overall ROI by 13% to 70%.
Second, while it is difficult for brands to spend large amounts without proof that emerging, new media works, Nielsen notes that spending small amounts on these media make it hard to evaluate its outcome. The report observes that podcast ads, influencer marketing and branded content can deliver over 70% in aided brand recall. Further, influencer-marketing ROI is in fact comparable to ROI from mainstream media.
In terms of ad sales growth strategy, ROI will ultimately influence publisher pricing power.
Publishers are not just competing against others in their channel, but also against other channels, so comparing channel ROIs can help set pricing strategy. The report points out that social media delivers 1.7 times the ROI of TV, yet social gets less than one-third of TV ad spend.
On the audience measurement front, campaigns with strong on-target reach can deliver better sales outcomes. To capitalise on opportunity and drive impact, advertisers should prioritise measurement solutions that cover all platforms and devices, with near-real-time insights.
Findings for Nielsen’s ROI report, its first ever, were generated using a range of measurement methods including marketing-mix models, brand-impact studies, marketing plans and expenditure data, attribution studies, and ad ratings collected in recent years.
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