Expert: Peter Gabany - 10/28/2008

Question
after an advertisement goes live, what are the tools used to measure its effectiveness. How can we know that it has delivered the message it was supposed to?

Answer
this is an involved question and has many solutions. The simple answer in advertising is to say that you cannot measure it but you pay attention to the indicators and in turn read the balance sheet.

If you run a TV commercial an outdoor campaign and newspaper all have audience and readership numbers. So with your ad spend you can bring this down to how many people COULD have seen your message. (ever get up from a TV commercial? Ever have several friends over to watch a football game? So in just those two examples how many people saw the advertising in you living-room within 15 minutes. How many people saw the print ad in the newspaper (do you subscribe to it)? So I believe that you get the drift - it is an imprecise measurement. And what you get from it is an indication but what is the ROI (return on investment)? What is then the conversion rate? How many people bought the hair gel from your ad and what was the cost?

Hopefully you would be able to say that for my $250,000 of ad spending I was able to gross a return of $1,000,000. This is how traditional advertising works.

On line or eCommerce has a far better set of metrics. By using pay per click campaigns you can not only measure this precisely but you can throttle on or off your campaign. A pay per click campaign means that every time someone clicks on your URL to get to a specific search key phrase, you get a charge. This could be cents or dollars per click. Again the real key is - of all the people that were driven to your product on-line how many people were sold.

As an example - you are lucky enough to have a good keyphrase that cost you $1.00 per click. And of the 1,000 people that you have that go to your site 35 buy the product. If the product costs $10.00 you are in great trouble, but if each purchase is $350 then you are very happy. It just cost you $1,000 to gross $12,250. Now the question is how long did it take to sell through. If it took you a year - you need several new products. If it does this daily, I want to be in your will.

We have a client that refined this practice so well that he spent $1,600 per month on pay per click. each month he average $380,000 in gross sales. Wanna know how long it took him to sell through each month? It averaged 2.5 days. WOW!!! you might say but here's the rub. He only had a small office, limited supply of product and required the remainder of the month to clear up his orders. Once he was ready he opened a new place, got better supply and hired 4 new staff and two trainers. he doubled his Pay per click budget and now does about $600,000 of business - monthly!

There are many other ways to measure but the real solution is trying to understand your conversion rate. If you give me $10 for advertising and I return to you $250 in sales will you not continue to give me another $10?

I hope that this helps,

Pete