Data2Decisions' Stuart Heppenstall unpacks why bigger budgets can mean great returns on investment, and more new learning from the Advertising Research Community database.
I was fortunate enough to be at Cannes Lions on Monday, talking to the audience on WARC’s Discovery Stage about Creative Commitment – a New Learning from the ARC Database, on behalf of the IPA and Magic Numbers' Dr Grace Kite. For those of you not familiar, the database contains results from typical, everyday campaigns that currently amount to £5bn worth of advertising spend across nearly 350 brands. These have been freely shared by several marketing effectiveness agencies that make up the Advertising Research Community (ARC). Learning from IPA award winners is great but being able to contextualise performance against normal campaigns makes ARC a fantastic resource.
The key finding from ARC that brought about this session is that advertisers who commit significant budgets to campaigns get much higher returns on that investment. Those supporting their typical, everyday campaigns with annual budgets of £10-50m were seeing a very strong average ROI of 13.2. Lower spends get lower ROIs but effectiveness increases with budget in this bracket as campaigns earned more cut-through and memorability. Brands spending over £50m were returning an average ROI of 2.1 as campaigns hit diminishing returns. The database also established a potential fear of commitment – 75% of ARC advertisers were unwilling or unable to reach spends to unlock that highest tier of returns.
Further analysis shows that commitment isn’t just a matter of budgets. Advertisers needed to be using multiple media channels across both offline and digital spaces to attain the best ROIs. That’s not simple. It requires effort and coordination on the planning side and additional expense creating different assets that are tailored to different platforms, and potentially the different audiences those platforms are likely to reach. These findings mirror those in The Effectiveness Code where James Hurman and Peter Field identified Creative Commitment as a strong indicator of a campaign’s success. They defined it from the budget, duration and breadth of the campaign, which the ARC findings draw several parallels to. What makes the ARC results so powerful is that they are based on typical campaigns, not just award entrants and winners.
“Can you show me straight away that it’s paying off?”
“Is that the best way to use this investment, or can we make savings elsewhere?”
“How can you be sure it’s definitely going to work?”
The ARC data also suggests that advertising is indeed risky – seven out of every ten advertisers in ARC returned less than £2 in revenue for every £1 spent. That’s concerning as that would mean a negative return on investment in profit terms for many businesses and, with advertising paid for out of profits, it’s not paying off.
There are ways to mitigate that risk. Having great creative helps – of IPA award-worthy campaigns in ARC, just 17% had those same low returns and nearly half saw ROIs above £8. One aspect that differentiates IPA winners is creative commitment – they spend 70% more than other campaigns on average. But how do you know if your campaign is good? Measurement can help you to identify winners, and with the level of returns on offer from finding one, it is well worth investing the effort to understand how you are performing. Options are varied: from copy testing creative before it airs, through incrementality testing across different versions, audiences and placements, to marketing mix modelling which can look at how channels work in combination and alongside non-media factors to drive behaviour.
My talk concluded that advertisers should measure campaigns regularly, and commit when they work.
Data is currently being collated to update the ARC database into 2022. I would urge any agencies reading to reach out regarding contributing their data, and advertisers to push your agencies to do the same. We make better decisions when we are informed about our choices and ARC is very well placed to do that for marketing, moving us away from traditional rules of thumb or very speculative approaches. Hopefully, with even more case studies, we could delve deeper into ARC and cut results across multiple dimensions to answer questions like “how much budget should I commit for a business of our size?” and “what is the optimal channel breadth and mix for our sector?”.
Sadly, my visit to Cannes was extremely short, but I did manage to listen to the IPA and WARC talk on the triple jeopardy threat facing the advertising industry from Peter Field, Karen Nelson-Field and Orlando Wood. This led to some interesting questions in our session about whether our results differed: theirs showing that some (mainly digital) platforms drove relatively low attention, and ours showing that campaigns with good channel breadth performed better. I think that the desire to have uniformity across a campaign that includes digital has likely led to the narrow product focus style of AV advert that has become prevalent in recent years. It will be interesting to see if AV creative moves back towards the right brain, narrative style that Orlando advocates, and if it does how digital assets can be created to evoke that in a shorter or flatter format.
Stuart Heppenstall is Managing Consultant at Data2Decisions and presented the ARC database findings on the Discovery Stage at Cannes 2022.Interested in effectiveness? Register your interest for EffWorks Global 2022
The opinions expressed here are those of the author and were submitted in accordance with the IPA terms and conditions regarding the uploading and contribution of content to the IPA newsletters, IPA website, or other IPA media, and should not be interpreted as representing the opinion of the IPA.