Faulkner Lab Pty Ltd.
Why current channel planning tools can’t predict return on investment
Peter Faulkner, August 2009 (updated)
First up I’ll draw a line in the sand. Existing channel planning models and their
accompanying tools do not currently reflect the media and consumer landscape.
They do not permit media neutral planning, let alone calculate the word of mouth
effect. Furthermore, more advanced versions are too cumbersome, nebulous, or
tied to past results to be practically applied to predicting a communication
campaign’s return on investment using different media selection scenarios. So
they don’t model reality accurately nor can they predict it. In this article I’ll explain
why this is true, why people struggle and the way forward to fix it. I’ll also admit a
significant vested interest. My company has created a channel planning tool
called AtapaTM that, we believe, is a big part of the solution.
You don’t have to look far to see proof of the problem. In a World Federation of
Advertisers (WFA) July 2008 survey, Asia-Pacific members cited audience
measurement and return on marketing as the two biggest challenges they faced.
At Ad Age’s Hollywood and Vine Conference in February 2006, John Stratton
(CMO Verizon Wireless) told 400 ad agency heads that “Your clients are in
trouble. They are looking to you to save them. The ad inventory that has been sold
for the last 50 years no longer works, and marketers have started to figure that
out.”. Things have gotten worse since then.
All this means that predicting the return on investment of an advertising
campaign is not something done with a great deal of confidence if attempted at
all. According to Zenith Optimedia, global ad spend for 2008 is estimated at USD
491.6 Bn. That’s a lot of money to spend with little confidence.
Let’s ask some questions in an attempt to shed more light on this subject.
What has hampered finding a solution to what is patently a Godzilla-sized
problem? There are three principal reasons: