Although the internet has brought unrivalled trackability of some media channels, it has also made the job of planning a campaign to deliver a perfeormance outcome, such as a sale or a lead, challenging, especially when it comes to traditional media channels.

With communications budgets being squeezed tighter than ever before, activity that doesn’t appear to add to the bottom line is becoming increasingly difficult to justify to clients. Measurement of payback is now an integral part of the campaign planning process, and econometric analysis and modelling is a key tool to analyse and refine media campaigns.

One of the main issues for clients who traditionally focus on direct response is that despite giving customers uniquely trackable actions, the ease of searching for a brand or going directly to a website often wins out, particularly with the rise of mobile and tablets. As a result it has inadvertently made accurately tracking advertising performance using the traditional direct response methodology almost impossible. Whilst this isn’t necessarily a groundbreaking insight, the challenge it presents is compounded with the ever toughening economic climate and the knock on pressure from clients to be able to rationalise every pound of investment.

This is especially true with regards to the field of performance, where invariably a client not necessarily based in marketing can point to a report which is showing a strong performance from the digital channels, notably search, and a declining response rate from TV. The difficulty is that following such an optimisation, especially in the case where the client’s performance is driven by branded search, will invariably lead to a drop in performance with no obvious cause.

Econometric analysis is therefore a key tool to understand the true performance drivers for a brand to build confidence with a client’s finance team and ultimately secure future investment. However, it’s important to note that econometric analysis is only useful if the client uses the information it provides on a regular basis. It must be integrated to become part of the day-to-day planning activity.

It’s arguably more important for smaller performance-centric clients where every penny is relied upon to deliver a result. However, this is also the circumstance where a full scale econometric study may simply be too much of an investment, especially with the first piece of analysis. As with all things, technology has a role to play as clients and agencies are increasingly able to utilise modelling software to complete the heavy lifting to create ‘light’ versions of econometric modelling where the upfront costs are typically lower.

With this, we can begin to understand the true drivers of performance and optimisation across the full media mix and ultimately build confidence in the value of econometrics within a client’s organisation. This will in turn help to justify a more complex study down the line if required. This is the approach we have begun to take with a number of our performance clients and it is providing a powerful new view of what drives their media performance and ultimately how we can deliver further efficiencies within their media mix.

Another area this type of analysis is having a big impact on is quantifying the sales value of investing in the brand. For a number of clients we work with there is a tension between the requirements of the campaign to build awareness, consideration and attitudinal shifts and the business reality of getting an FD to approve potentially millions of pounds of advertising spend. By having a fast, low cost modelling approach it allows clients to demonstrate a tangible business benefit of investing in the long term health of the brand as well as ensuring media investment weights are mitigating diminishing returns.

An unexpected advantage of this approach to modelling is the removal of the ‘PowerPoint middle man’ allowing the performance planning teams at MEC direct access to the outputs of the modelling. This democratisation of the model itself allows econometrics to take a more prominent role in the day to day planning of a client’s media and, more importantly, puts the model into formats that clients are used to seeing (monthly forecasting and budget trackers etc.) rather than it living in a six-monthly PowerPoint template.

Equally, by empowering the planners to get closer to the modelling it allows us to change how the model is used to meet client pressures. A recent example for an MEC client involved taking the model and developing a scenario planning tool which allowed us to not only forecast the sales impact of a change in market conditions, but also identify the opportunity cost of recovering those sales using media.

As consumer journeys get more complex, econometric analysis is a key tool to analyse and refine media campaigns. With the importance of ROI on the rise, the way in which econometric analysis is executed, the findings it leads to and embedding it within the day to day planning cycle will only continue to grow in importance.

Dominic Charles

Dominic Charles


Dominic Charles is Business Director of Performance Planning at MEC.