Monday, February 25, 2008

CPM, CPC, CPL or CPA – Don’t Forget - Marketing is Marketing

If you are buying or selling online media, you know all these terms as CPM, CPC, CPL and CPA. Even if you do not, and you are in internet space, well one hopes you know them. But how they are used by a lot of people is really weird, some of them talk about it, as if it is a brand new marketing thing. Well it is and it is not! The fundamentals stay the same, but the beauty of online is the interactivity, that’s the closure, which makes it great. But calling the new “performance marketing” as new, and old being fundamental marketing as idiotic is not the best bet. Get to meet some people new to online space, young rookies and old hands(from other media), they make amazing claims.

Quick recap, CPM(M for mille, Latin for 1000) is cost of thousand impressions for a banner, CPC is cost per click, CPL, is cost per lead and CPA, cost per acquisition, which is essentially cost for sale. Now CPA and CPL is some times used as the same thing, but for simplicity, there is a lead and there is a sale, the cost for a lead and a sale is different. Now we all know online media is capable of interactivity, therefore an impression can become a click can become a lead can become a sale, all online mind you.

Now the simple diagram above asks us to come up with some basic metrics to ponder about:

CTR – Impression to click ratio

CTC – Click to conversion ratio ( conversion being desired action, lead or sale)

ITC – Impression to conversion ratio

eCPM – Effective Cost per Mille [for campaigns bought/sold on click(CPC) or conversion(CPA, CPL)], similar but not the same as ER, Effective Rate in television media sales.

Here is how a basic campaign would look like:

Impressions

CPM

Cost

Clicks

Leads

CTR

CTC

CPL

250,000

70

17,500

1,508

155

0.6032

10.28

113

Now everyone knows it. Just a refresher.

A little look at conventional media, TV maybe, over 6000 crores of media spends. Suggested for top of the mind recall, brand awareness and positioning, has all audio, visual appeal. No interactivity though! Bought on GRPs, the summation of TRPs, some deals of CPRPs(cost per rating point), channel shares for niche genres and so on. The key in the segment is generally the break TVR. No performance marketing here.

Lets see the marketing fundamentals:

  1. Advertising objectives – establish communication on brand or product or features or offer or usage and so on.
  2. Advertising in action – Communication(message) catching attention of consumer, goes through his threshold barrier of perception to make an impact in short term memory. Consumer can take it similar(something experienced before) or differentiated(brand new experience) learning.
  3. Consumer takes action

Back to beauty of online, the ACTION can be take on the spot of viewing the media. The action is the click. Now action is the important piece, but this important piece does not happen in any other media. So what are media spends doing on Television, print and radio, brand building.

Now there are two parties in media business, buyer and seller. In online space, almost all buyers are asking one question, how many clicks will I get, and what is your CTR, I have learnt till here! And that’s enough. Well who are sellers to say anything, once buyers have decided. Sellers just sell the clicks and the CTRs, and for some firms, up to CPLs and CPAs. You come to online, we are performance, rest is brand building. Online is no brand building. Now how do you get the clicks and conversions, creative optimization, ad serving technology, targeted campaigns – contextual targeting, behavioral targeting and so on. All the science of performance management. Everyone can geo-target, everyone has an ad-server, all servers are same and have same capabilities. Google will say double click is the best, MSN will vouch for Atlas and Yahoo is a fan of Right media.

But the question is are we studying and understanding ad-serving, targeting, creative optimization, and before all that creative planning and execution, to get the right message across. Creative planning and execution is the smallest job in the cycle, especially in the field of “performance marketing”, as why do you care about that when the thing you are buying is clicks or conversions. Don’t worry about the message, we will give you clicks!!

The online creative planning and creative optimization is last thing on the platter of performance marketing. Media Buying as a skill is not about buying clicks or leads. Look at the biggest performance marketing set-up in the world, Google Adwords, the quality score is a major component in that, which allows high score owners to have lower bids, high scores are achieved for consistent and high performing advertisers. Which is in-turn a case of better CTRs, which you achieve by putting the right message across to consumer, through even the textual ads. Now many people will say if I am buying clicks, why bother on CTR, I will only worry about click to conversion ratios, that determines the quality of my click. Nopes my friend! That’s not the way world’s number one “Performance Marketing” algorithm runs. The Adwords algorithms respects and rewards the fundamentals of marketing.

Here is a reverse take on the brand building piece. Recently I got a pitch from a firm, which claims to run TV ads on a 2 by 2 inch video screen, while I am checking my mail. Has it got better value than regular gif/jpeg banner? 100 % correct. Should it command a better CPM? No doubt about it! This will have a better CTR, sure why not! But this is the future, and it will kill the TV, and the spot price should be comparable to TV spots by any stretch of imagination, Hell No!! You will not believe it, we had a discussion on comparing this with the TV advertisements.

I think a bit of the problem is the lack of trained manpower in the industry. The opportunity for analytics to improve efficiency and effectiveness of media campaigns in Internet is far greater than any other medium. This needs to appreciated and pursued. The online media needs people who can guide brand managers to reach their desired marketing objectives through the online space.

Well Marketing is Marketing, on TV or online, the fundamentals stay the same. The execution and the metrics may change. In my opinion, Online is one of the best medium for brand building and simply the best for performance campaigns. But this should be understood from both fundamentals of marketing and analytics in the web domain. No offence to anyone guys!! Lets build some brands, lets get some leads and conversions, lets get it done!

3 comments:

Sajal said...

Nice commentary

amit said...

Dear Sandeep ,great online informative stuff will do remember marketing is marketing ..

amit said...

Dear Sandeep ,great online informative stuff will do remember marketing is marketing ..