A Better Way to Gauge Sales Lift: Closed-Loop Measurement

A healthy marketing budget can be a powerful fuel for brand expansion and revenue growth. But when sales improve, most marketers need to prove that their business was the cause of the increase in sales. Marketers must link their tactics directly to sales results most simply and reliably.

Black boxes do not help

Managers outside of marketing must believe with their intelligence and courage that marketing drives sales

When marketers try to implement multi-touch attribution models (MTAs), they try to capture all activities and assign partial credit using complicated forecasting and modeling techniques that go beyond the minds of those without a doctorate.

With an average CMO term of just 31 months (and only 27.5 months for major consumer brands), it goes without saying that something needs to change to restore marketers’ confidence and spending.

There is an alternative to MTA, which links marketing activities directly to sales results. Closed-loop measurement (CLM) uses simple mathematical calculations. By comparing the change in revenue for an exposed marketing group to a control group, it is possible to determine the increase in revenue generated by the marketing activity in question.

Despite its greater complexity, the MTA is unable to measure incrementality. This is one of the reasons why Forrester claims that the MTA is in the “valley of disappointment”. It doesn’t matter how many six-month IT projects are needed to deploy the system.

Linking expenses to sales

Keep it simple by measuring revenue growth and you’ll know what works and what you can invest in again. Knowing what works will make your decision-making much easier, deliver better business results and do it the right way.

Follow the four steps below to see why closed-loop measurement can be marketing’s best friend.

  1. Speak the language of business leaders

I once heard a colleague say to the president of our business unit that marketing increased its advances by 8% in the previous year. The director refused to believe it because sales fell 2% in the same period. It doesn’t matter that they can both be true. The supervisor lost confidence in my colleague, who had to work hard to win it back.

For your company’s leaders, directions, impressions, and clicks mean nothing. It is after the sale. Link your programs to the impact on sales and avoid credibility issues.

The first step you need to take to complete the sales data cycle is to provide the largest and most reliable source of sales data that your company can associate with individual campaign impressions. Point of sale data is often insufficient. Good sources to consider include direct e-commerce sales, loyalty card information, private label credit card information, electronic receipts, brand card information, and payment processor information that generally cover all types of credit cards credit.

  1. Separate the signal from the noise

There are many fraudulent activities in the world of digital advertising. Bots can still increase the clickthrough rate, but they don’t buy the products in the ads they click on. In fact, a study by Imperva Incapsula found that fraudulent bot clicks cost companies $ 7 billion each year. It has never been so clear that clicks don’t mean sales.

By measuring revenue growth, you eliminate noise and get reliable results that can be shared with other departments.

  1. Compare results across different platforms

When measuring the sales impact of individual marketing activities compared to a control group, you have a common standard for measuring results. Compare marketing activities across media, platforms, or suppliers and optimize your money. To ensure maximum accuracy, new control groups must be created regularly to account for seasonal changes and other fluctuations.

Companies differ in choosing to create steering groups. Assigning potential advertising targets to an exposed group or holding company is the gold standard, but few companies want to pay the extra cost of running public ads to their groups. It is much more common to generate a similar control group of consumers who have not seen the ad.

The first key to success is ensuring that a consumer assigned to a control group provides a logical comparison for the people in the exposed group. For example, if your brand consists of families with children in the Northeast, the same type of person must be in your control groups.

The second key is the measuring instrument used. There must be a way to monitor and correct cases where the control group is out of service. Even good plans sometimes go wrong. It’s important to know if the amount you’re spending on your brand is the same in both the exposed groups and the control groups before the ad is shown.

  1. What is old is new again

When I started my career in marketing, test methods vs. verification took too long. I had to place ads on a market and find a comparable market to compare it with. Conducting several experiments at the same time was difficult, if not impossible. With the advent of people-based marketing and measurement, it is possible to isolate people exposed to an ad from another group that has shown another ad. Add a control group that cannot be seen by anyone and you have the ingredients for an effective closed-loop measurement by comparing two different alternatives to each other and the control.

Conclusion

Traders have more information than ever, but they are losing the forest to all the trees. MTA is the trees. Non-incremental trees. In contrast, closed-loop measurements are a more reliable way to link marketing activities to the impact on your business.