Understanding the contribution that marketing – and advertising in particular – makes to business growth is crucial to the success of both marketers and the companies they work for. But we know marketers often lack the confidence and the ability to demonstrate the value their work delivers.
To help marketers overcome these challenges, we’ve delved into Gain Theory’s rich database to analyze the contribution that advertising makes to growth at 75 companies across a wide range of industries and geographies.
The results of this research are published a new report – Measure. Optimize. Thrive. How to demonstrate advertising’s value and boost growth. Here are three key takeaways:
1. Advertising pays back 2.9X the initial investment
On average, companies spend three percent of their revenue on advertising. There is a wide range, with some companies spending less than 1% and others into the high teens. Overall, this spend contributes 8.7% to revenue, which represents a multiplier of 2.9x the initial investment.
2. Measuring and optimizing contribution boosts growth
Companies that measure advertising spend and contribution, then optimize their approach, experience a year-on-year increase in revenue. There are two ways to grow advertising contribution: spend more wisely (e.g. by moving to a more optimal mix of advertising channels or by moving to a more optimal strategy) and spend more.
3. CPG companies face unique challenges
CPG companies often generate a lower advertising contribution (5.5%) compared to non-CPG companies (11.5%). This is due to a range of factors, including a heavy reliance on retailers, more comparable pricing, and promotion-heavy strategies.
Three steps you can take to make your advertising more effective
Whatever sector you’re in, the size or maturity of your company, or the geography in which you’re based, there are things you can do to measure and optimize your advertising contribution. Here are three steps to take now, as outlined in the report:
1. Implement or reassess your measurement program
Use MMM or A/B testing or a combination of the two and start to measure the contribution of advertising to revenue. Consider your company size, data availability, and ability to switch off marketing investment when selecting the appropriate method.
2. Analyze and optimize advertising spend
Once you have the required data, identify which channels and strategies are most effective and shift your budget accordingly. Focus on spending more wisely, not just more, to create a virtuous circle of improvement that drives business growth.
3. Build a business case for increased investment
Use the data from your measurement efforts to demonstrate to the C-suite the contribution that advertising makes to business growth. Advocate for increased advertising budgets based on proven results and cement marketing as a driver of growth rather than a cost to bear.
Download your complimentary copy of Measure. Optimize. Thrive. How to demonstrate advertising’s value and boost growth.