What is advertising effectiveness measurement? Indicators for each medium and how to use each

Great advertising requires more than just compelling creative.

The important thing isRepeated improvements through "advertising effectiveness measurement" and data accumulationMost companies that achieve results through advertising are thorough in implementing this PDCA cycle at high speed.

In this article, we will explain the effectiveness measurement indicators for online and offline advertising, as well as why measuring advertising effectiveness is said to be ``difficult,'' so please be sure to read it for reference.

What is advertising effectiveness measurement?

Advertising effectiveness measurement is the measurement of the effectiveness of online advertisements placed on the web and offline advertisements such as television commercials.Visualize the extent of the effect.

For example, suppose you place an online ad with the goal of "increasing the number of requests for information." If the number of requests for information increases as a result of the ad, you can say that the ad has been effective. If the number of requests for information does not increase after the ad is placed, you can judge that the ad's effectiveness is low.

SuchVisualize whether advertising was effective or notThis is advertising effectiveness measurement.

However, the role of advertising effectiveness measurement is not just to determine whether the advertisement was effective or not. If the advertisement was effective, it is to ask "why was it effective?" If it was not effective, it is to ask "why was it not effective?"　It also serves as an indicator for analyzing factors behind success and failure.

By measuring advertising effectiveness, whether your ad placement is successful or unsuccessful, you can make continuous improvements.

Indicators for measuring advertising effectiveness and how to use them

When measuring advertising effectiveness, several indicators are used depending on the type and purpose of the ad placed. The indicators differ depending on whether the ad is online or offline, and there are also points to use for each.

Here are some key metrics to measure effectiveness for offline and online advertising.

Online advertising metrics

CTR (click through rate)

CTR (Click Through Rate)The percentage of ad clicks relative to the number of times an ad was displayed (impressions)This is an effectiveness measurement indicator that represents the following:

For example, Google's paid search ads appear at the top or bottom of the page depending on the keywords a user searches.

In order for these ads to be clicked on, the ad creative (text, images, video) must be appealing to the target audience.

A high CTR means that the ad creative was appealing to the target audience.

CPC (cost per click)

CPC (Cost Per Click)Advertising costs incurred when an ad is clickedThis is an effectiveness measurement indicator that represents the following:

With the Google listing ads mentioned earlier, the ad that will be displayed is decided each time a user performs a keyword search, and ads placed by advertisers with higher budgets are displayed with priority.

For example, if an ad placed with the keyword “DX” receives 1,000 clicks and the total advertising cost is 10 yen, the CPC will be 100 yen (*1).

Rather than relying solely on CPC, it is important to judge advertising effectiveness by combining it with other performance measurement indicators.

(*1) The cost of listing ads fluctuates from time to time, so the cost of each click cannot be measured.

CVR (Conversion Rate)

CVR (Conversion Rate)Percentage of users who converted (*2)This is an effectiveness measurement indicator that represents the following:

CVR is often explained as "the number of conversions divided by the number of ad impressions," but in order to measure advertising effectiveness more precisely, it is also important to calculate it based on the number of clicks.

In this way, by subdividing the effectiveness measurement indicators, more detailed measurement of advertising effectiveness can be performed.

(*2) The action you want users to take after coming into contact with your ad (such as requesting information or purchasing a product)
(*3) "LP = Landing Page": The first page you reach after clicking on an ad

CPA (cost per acquisition)

CPA (Cost Per Action) is the ratio of the total cost of advertising to the total cost of advertising.How much did you earn per user?This is an effectiveness measurement indicator that represents the following:

For example, if the total cost of advertising is 100 million yen and the number of users acquired as a result is 100 yen, the CPA will be 1 yen.

CPA is one of the important indicators for measuring advertising effectiveness, but please note that a high CPA does not necessarily mean a low advertising effectiveness.

Even if the CPA is high, if the repeat rate or customer LTV (*4) is high, it can be determined that the advertising is effective.

(*4) Profit gained through relationships with individual customers (companies)

Offline advertising effectiveness metrics

GRP (gross viewing rating)

GRP (Gross Rating Point) is an effectiveness measurement index used in television commercials.The total viewership rate of TV commercials aired during a certain periodIt is calculated by multiplying the average viewership rating of a TV program by the number of commercials aired within the commercial airing time slot.

For example, if a television program has an average audience rating of 10% and three commercials are aired during the program, the GRP is 3 x 10 = 3 GRP. The higher the GPR, the more viewers the TV commercials reached.

However, it does not tell us whether or not the person actually watched the TV commercial. It only tells us how many viewers saw the TV commercial that was broadcast.

GAP (total gaze rate)

GAP (Gross Attention Point) is an index proposed by Digital Intelligence Inc. for measuring the effectiveness of television commercials.

GRP indicates how often a TV commercial is shown, whereas GAP isHow much attention viewers paid to TV commercialsIn other words, GAP is an effectiveness measurement indicator that compensates for the issue with GRP, which is that it is not possible to know whether or not a TV commercial was actually viewed.

Although GAP began pilot testing in 2015, it has not yet been established as an effectiveness measurement index. However, since it allows for more detailed measurement of TV commercial advertising effectiveness, it is thought that GAP will replace GRP as the mainstream in the future.

Advertisement equivalent

What is the advertising conversion value?The value of having your company's products, services, and initiatives featured through your company's PR and PR activitiesThis is an effectiveness measurement indicator that grasps the following:

For example, if information about the release of a new product is reported on a news program, it is likely to have the same advertising effect as a TV commercial aired at the same time. If it is featured in a newspaper or magazine, it is likely to have the same advertising effect as if it were placed in an advertising space with a similar amount of space.

In this way, when a product is featured in a news program, newspaper, magazine, web media, etc., the advertising equivalent value is calculated by converting it into a similar advertising value.

In recent years, it has become important for PR activities to set advertising equivalent value goals in advance and proceed with PR activities strategically.

Increase in number of name searches

What is the number of named searches?The number of times a specific company name, product or service name is searched on search engines such as Google and Yahoo!By measuring this increase rate, you can use it as an indicator to measure the effectiveness of offline advertising.

For example, if the number of branded searches increases by 20% after a TV commercial airs, the advertising can be considered to have had a certain effect.

However, other factors such as seasonality and trends can also cause increases in brand-name searches, so it's important to measure and consider the increase in brand-name searches in light of other factors that may be influencing them.

Increase in site access

In addition to the number of named searches, the increase in site access numbers such as PV and UU is also an important indicator of the effectiveness of offline advertising.

Search engines are not the only way to access a company, product, or service website. Many users also access a site from links on other sites or social media posts.

For example, even if the increase in the number of branded searches is not good, if the number of site visits is increasing, it is possible that the advertisement you placed had a branding effect. "It is possible that coming into contact with the advertisement made an impression on the user's subconscious."

At first glance, the number of branded searches and the number of site visits seem to be similar effectiveness measurement indicators, but simply shifting your perspective slightly can change the way you look at advertising effectiveness.

Why advertising effectiveness measurement has become "difficult" in recent years

In recent years, many marketers have been troubled by the idea that measuring advertising effectiveness is difficult. Here, we will introduce the four main reasons why measuring advertising effectiveness is said to be difficult.

1. You can’t visualize the effectiveness of offline advertising

Measuring the effectiveness of offline advertising, such as television commercials and newspapers and magazines, has been a long-standing challenge.

In the case of television commercials, there is hope for new effectiveness measurement indicators such as GAP (gross attention percentage), but currently advertising effectiveness is mainly measured using GRP (gross viewership rating).

Unlike online advertising, it is not possible to measure CTR (click-through rate) or CPA (cost per acquisition) in detail, and a major challenge remains: it is difficult to visualize the effectiveness of advertising.

2. The effect continues even after the ad ends

The effectiveness of advertisements continues even after they have finished being published (broadcasted). This is one of the factors that makes it difficult to measure the effectiveness of advertisements.

What effects last even after the ad ends?

While the above joint research focused on television commercials, the ripple effect, residual effect, and brand accumulation effect of advertising are believed to exist for all types of advertising.

(*5) This is a score (249-2017) created from statistically processed analytical data (2021 cases) owned by XICA, so it is not common to all cases.
(*6) In this study, “long-term” is defined as a period of 3 to 5 years.

3. User touchpoints are becoming more diverse

The fragmentation of online advertising (search engines, display networks, social media, video streaming, e-commerce, etc.) has led to a diversification of user touchpoints.

While it is now possible to create detailed advertising strategies based on the purpose of the advertisement, the characteristics of the product or service, and the target, it is also true that this has made it more difficult to measure the effectiveness of advertising.

It is necessary to accurately grasp which ad a customer comes into contact with and at what point in the purchasing process, and what path they take to reach a conversion.

4. We tend to ignore indirect effects

When measuring advertising effectiveness, indirect effects should not be ignored.

For example, if someone clicks on an ad on a Google search result page and converts, you might be tempted to only evaluate the Google listing ad for contributing to the final conversion.

On the other hand, the ripple effect and residual effect of TV commercials and other advertising effects will only lead to final conversion.

Indirect effects are difficult to visualize, so they are inevitably an element that tends to be ignored, which is another factor that makes it difficult to measure advertising effectiveness.

How to measure the impact of advertising on business results

"ROAS," "ROI," and "LTV" are important indicators for measuring the impact of advertising on business results.

ROAS: measuring results based on sales

What is ROAS (Return On Advertising Spend)?"Return on advertising spend"You read it right!How much revenue did you get for the amount of money you spent on advertising?Represents

ROAS (%) = Sales from advertising ÷ Advertising costs × 100

The higher the ROAS, the better the advertising results. However, because ROAS does not take into account expenses such as cost of goods sold and labor costs, a ROAS rate exceeding 100% does not necessarily mean that you are in the black.

Since ROAS results will vary depending on how advertising sales are set, it is important to analyze it from the appropriate perspective for each company.

For example, ROAS will change depending on whether you set it as "new revenue during the advertising period" or "new revenue generated from online inquiries."

In order to properly use ROAS as an indicator for measuring advertising effectiveness, the optimal solution for each company must be found through continuous advertising management and effectiveness measurement.

Finding this optimal solution is what makes ROAS difficult, but it is one of the essential indicators for verifying the impact advertising has had on business results.

ROI: measuring results based on profit

What is ROI (Return On Investment)?"Return on investment"You read it right!It shows how much profit you have made from the cost of advertising.It is also called return on investment or return on investment.

ROI = (Sales from advertising – Cost of sales) ÷ Advertising expenses x 100%

Even if a company has sales, it cannot survive without profits. ROI measures the effectiveness of advertising based on the profit obtained by subtracting the cost of sales, such as labor costs and fees, from sales. It can be calculated easily if you know the average profit unit price of the product or service, so it is useful for understanding the current situation.

Focus on LTV per ad

What is LTV (Life Time Value)?"Customer Lifetime Value"You read it right!A quantification of the benefits that a customer brings to the company through customer interactionsGenerally, LTV is calculated as follows:

• BtoC LTV = Purchase price x Number of purchases x Continuation period
• BtoB LTV = Annual transaction amount x Profit margin x Number of years
• Subscription LTV = average duration (*7) x average revenue per user (ARPU)

(*7) Average duration is calculated by dividing 1 by the cancellation rate.

Modern strategies for measuring advertising effectiveness calculate these LTVs on an "ad-by-ad" basis.

The reason is that even if there are two ads with the same CTR (click-through rate) and CPA (cost per acquisition), the LTV of customers acquired through each ad is often different.

This means that LTV varies depending on the ad, and in order to measure advertising effectiveness taking this data into account, you need to calculate LTV for each ad.

If you simply use LTV, you will only be able to see the results in relation to the total advertising spend, which means you are likely to fall into problems such as the aforementioned "tendency to ignore indirect effects."

XICA's efforts to solve the problem of advertising effectiveness measurement with data

If advertising effectiveness is measured correctly, it will steadily increase. However, the four challenges mentioned above make it difficult to measure advertising effectiveness.

We at XICA are working to use data to solve these problems in measuring advertising effectiveness.

Overall optimization of marketing activities

For companies that are struggling with measuring advertising effectiveness, XICA offers "MMM (Marketing Mix Modeling)"Visualizing advertising effectiveness using analytics."

MMM is a technique and technology that uses data and statistical methods to measure the effectiveness of overall marketing activities.

At XICA,MMM Solution "MAGELLAN"By providing this service, we have supported many companies in measuring the effectiveness of their advertising.

When measuring advertising effectiveness using MAGELLAN, you can visualize the following:

• Sales impact per ad
• Ripple effects, residual effects, and brand accumulation effects of each advertisement
• Brand Equity Through Advertising
• The impact of factors other than advertising, such as sales promotion and sales
• The customer journey from awareness to outcome
• etc.

Your partner for realizing data-driven marketing

XICA is a professional partner that helps clients realize data-driven marketing and support sustainable business growth, based on a wide range of statistical knowledge including MMM and data science techniques.

Measuring advertising effectiveness is an important element that forms the basis of marketing activities.The results of effectiveness measurements are incorporated into the marketing strategy, tactics are designed, each measure is implemented, and effectiveness is measured again. Unless this PDCA cycle is carried out at high speed, it is impossible to maximize the ROI of marketing.

By taking a customer-oriented approach and combining a variety of solutions, XICA contributes to visualizing advertising effectiveness measurement and resolving the various issues that arise.

In conclusion

The approach to solving the problem of measuring advertising effectiveness will vary from company to company, but one thing they all have in common is that measuring advertising effectiveness will become even more complicated.

Online advertising will continue to become more fragmented and user touchpoints will continue to diversify. Changes in advertising trends, such as the metaverse and augmented reality (AR), will also accelerate.

At XICA, we strive every day to hone our data science to help companies that want to measure the advertising effectiveness of their entire marketing activities and maximize ROI.