Seven years is a long time in marketing. It’s enough time to hire and fire at least two CMOs, partner with several influencers who have questionable followings, or invest and lose millions in NFTs.
It’s also the time that’s elapsed between the publication of Profit Ability – the award-winning, UK-focused report into how to effectively measure the long-term impact of advertising – and its follow up Profit Ability 2, which launched in November and has also won an award.
Co-written by Gain Theory and Ebiquity, and sponsored by Thinkbox, the 2017 report was widely viewed as a pivotal turning point for an industry stuck in a short-term, digital spiral.
In it, we argued that companies had become too focused on short-term efficiency and not focused enough on long-term effectiveness. What was needed was less ROI, more total profit. Less right here, right now, more building every day.
While much has changed in the world since then, Profit Ability 2 – to which Gain Theory has also contributed – shows that these messages still hold true. What’s more, it presents compelling evidence as to why investing in advertising pays off.
Ian Whittaker, Managing Director and Founder of Liberty Sky Advisors, sums it up well in the introduction: “Profit Ability 2 provides the evidence that marketers need to prove the value of advertising to their CEOs, CFOs and Boards – and ultimately its value in supporting and strengthening their companies’ share prices.”
At 134 pages long, Profit Ability 2 is a comprehensive but essential read. Here are three key takeaways that stand out for me:
- Advertising works and continues to work, despite the buffeting it has got in the last seven years from inflation (both in the shops and in media), COVID, and geopolitical uncertainty. For every £1 invested, advertising pays back £4.11. This is just 4.8% down on pre-COVID levels. There are changing currents under this seemingly calm ocean, however. TV and social ROIs are down, whereas BVOD and online video are up, for example. The strong advertiser needs to keep a keen eye on these movements to ensure they invest in the most effective channels.
- Marketers are using a wide range of channels for their advertising, which is important because in most cases 1+1 >2 (and indeed 1+1+1+1+1 >5). This is especially true when brands need to reach multiple audiences across disparate media. The report studied 141 brands and found that over 90% used 5+ channels in their mix. In a world of disaggregated media, brands are choosing to invest in more media channels and reaping the benefits.
- Media investment is close to optimal. When we analyzed the average media mix versus the optimal mix on an industry-by-industry basis, we found the average was close to the optimal. Using Pearson Rank Correlation to measure whether advertisers were investing the highest proportion of their budgets in the highest performing channels, we found a 98% correlation. Given 100% means they would have been perfectly matched, we think this means they’re making good decisions!
It’s fantastic to see such positive news about the impact of advertising and the great work that advertisers are doing to make it happen. Of course, there is always room for growth and continued improvement – broadly, advertisers still seem over-invested in online display, while they could do more to improve trust with consumers.
Nevertheless, I am optimistic that advertisers are on the right track when it comes to making the right investment decisions to drive growth over the next seven years.
Download Profit Ability 2.