The reason is simple math.
Traditional advertising works on the notion that if people are reminded about something enough they will take action. It worked fantastic up until the 1920s when the flow of information came mostly from one source (print media) which had a fixed number of ads vying for your attention. If a business had enough money to advertise, then they must be doing well.
As the number of channels increased, so did the number of ads. The effectiveness of ads dropped, but we still dealt with a fairly finite set of potential ads trying to grab our attention until the mid 90’s when digital advertising really took off. What started as a 44% click through rate for some of the first ads in 1994, is now at an industry average of 0.08% in 2017.
Still though, digital is better than print in most regards. Consumer habits have long shifted to favor digital consumption of media. Fewer people are consuming print, and people increasingly want to learn more about a place or have a prior connection before they spend money. It is why print advertising is currently facing around an 8% decline year over year.
Impressions Based Advertising
A big part of the problem with traditional advertising is the impression driven metric. Again, in the mid-century when there were few ads, hitting as many people as possible was the way to drive sales. As ad channels have grown, and the number of potential ads someone can see is limited only by the number of seconds awake in the day, the return has bottomed out. Increasingly the only way to measure if someone is actually interested is to see if they take some action on an ad. Even then the industry average conversion rate on the action is only between 0.5-1%
So let’s say you have a campaign that you want to hit all 735,000 people in the Little Rock metro. If you can negotiate a nice ad rate of $3 cpm (cost per thousand, which also would be difficult to negotiate for a niche audience), that would cost you $2,205 for your one time hit of everyone.
You have now a 0.08% engagement rate, so now you are down to 588 people. We will take the high end of the rate that and say you converted 6 people (rounding up). If your restaurant makes an average of $45 a table for dinner you just made $270 off your $2,205 investment. You better hope they come back a lot or tell a lot of friends. You simply can’t make your money back this way.
Engagement Based Marketing
Those numbers are exactly why I started an engagement based approach. Factoring in some impression based marketing is fine when you have a product that sells for $5,000,000 like a laser company I worked for, but when you are selling $3 tacos on Tuesdays you are going to lose your ass quick.
Instead I wanted to focus on a way to hit multiple engagement opportunities to convert customers. We started with our content, which we give freely and is the basis of everything we do. It is how we drive awareness about restaurants and we do it to support the local industry as a whole.
Contrary to rumors a few people like to spread, we are not pay for content. We try to take an active role in understanding what is going on in a partner restaurant and what stories are going untold, but content is always free as long as it makes sense for our audience and hits our editorial standards. What we do is actively monitor and make sure that content performs at a high rate for our customers. Our the engagement on our content reach is around 5% across social and email. So we make sure our content hits more people to increase total engagement.
We then use external sources to increase engagement at increasingly high rates. Our highly targeted social advertising hits around 2% engagement, our highly targeted google ads around around 3%, and we use various social channels that all convert high.
By focusing on the engagement side, we do not care as much about the total reach, only that we get as many people as possible to take an action. By merging multiple engagement points together combined with display advertising we are able to get an effective 18% engagement rate.
We never try to hit 735,000 folks, but say we did using the old numbers you would engage with 137,425 folks, convert 1,374 of them, and make $61,841 off the investment.
Again though, we do not do it quite that way. We use impressions as a follow up to increase conversion rates while boosting engagement all around. It is a more cost effective way of handling things because it is easier to influence a purchase once they have made an engagement than before.
Performance Based Marketing
The next big step for us is performance based marketing. It is what happens when we combine real data with marketing that things become magical. Instead of taking a guess at what rate we may convert at, we have restaurant data to back it up and make informed decisions about what people really want. It helps restaurants connect with customers and customers pick restaurants better all around. It is the base thought behind our new restaurant intelligence program we are rolling out.
Once there we can look at what types of engagements convert at what rates and make adjustments to restaurants in our marketing program along the way. It is even better than an engagement method since we know actual conversion rates. Initial trial runs support the data however that engagement converts at a far higher rate than impressions.
Of course, along with that data we can help restaurants start continuous improvement programs to constantly improve the quality and effectiveness of a restaurant, but that is for another day post.
If you are interested in any of this, hit me up. I would love to sit down and chat about it.