The New Rules for Direct Response Advertising

Brought to you by Tim Surowiecki

The challenging economic climate has brought with it increased scrutiny into marketing budgets -- underscoring the importance of ROI on advertising dollars. As a result, traditional brand advertising is quickly taking a backseat to direct response advertising.

Direct response can deliver more tangible, measurable metrics and ROI to cost-conscious marketers, while offering a significant opportunity for publishers to increase advertising inventory sell-through percentages. But this switch to direct response advertising brings with it a completely new set of rules. As publishers continue to increase their investment in this arena, it's essential for marketers to have a clear understanding of how to best manage direct response campaigns in order to truly tap into the revenue opportunities they present.

So what are these new rules of engagement? How can marketers tackle the unique challenges of this audience head-on to achieve true campaign optimization? Consistent improvement of conversion and click-through rates are the building blocks of success here, and it begins with the active and daily management of four key campaign components:

Creative
One size does not fit all. Testing is always critical when it comes to maximizing marketing ROI; in this case, it's important to test, refine, and optimize different executions of creative for different types of sites and different placements within sites. For instance, test a banner ad's color, as well as its copy and size. You may be surprised to learn that what performs well on one website may perform poorly on another. Apply what is working to other types of creative, and routinely check performance to figure out what is giving you the best return on your investment dollars. And don't be afraid to test new sites, creative, and more -- you'll never find out what will work without determining what won't.

Quick tip: Keep in mind that true success lies in a combination of both click-through rates and conversion. It's easy to get hung up on click-through rates, but sales are the ultimate measure -- so following your creative performance all the way through conversion is just as important.

Reporting and tracking
Track and analyze what is happening to your leads to figure out where and how they are converting. Once you have this information, it's important to have the tools in place to report on performance so you can take actionable steps to fix anything that isn't working or converting.

Quick tip: It's nearly useless to spend any amount of money on online advertising if you don't have the software you need to track your conversions. If you don't have your own reporting tool in place, consider using Google's Website Optimizer, or any other number of free reporting tools available via the web. Then, take a closer look at where potential converters are dropping out of your conversion funnel. You may find that your checkout process has form issues or confusing steps that are causing abandonment. Once your entire conversion funnel is mapped for drop-offs, don't leave it alone. Constantly review and test new adjustments. You'll often find that minor tweaks to wording, form layout, or imagery can have a significant impact on conversion rate.

CPA budgeting
Before beginning any direct response campaign, define what your true allowable cost per acquisition is. In other words, what can you afford to pay for each registration or sale? Make sure to consider the long-term value of your customers beyond the initial sale. Think of alternate ways that you can extract revenue from each customer, and factor that into your upfront costs. Often, marketers haven't done the math ahead of time -- which can lead to budget trouble down the road.

Quick tip: In a direct response campaign, be prepared to pay more per customer than in your standard search campaigns. Before you take the plunge, run the numbers to see what you can actually afford to pay for a new customer. You may find that you can't afford it -- or that it's very much worth the effort and investment. Once campaigns are launched, revisit your actual metrics to ensure that your projections on long-term customer value were correct. You may need to revisit your CPA goals based on how your ROI metrics shape up.

Vendor relationships
When it comes to your team of vendors, it's important to set and manage campaign goals from the start. Communicate your expectations -- such as important targets and your range of allowable CPAs -- on a daily basis. In a branding world, a campaign's worth is measured in impressions over a set time period. Direct response is an every day numbers game, so constant adjustment is crucial to reaching and exceeding ROI goals. Keeping your vendors in the loop will ensure that every change is seamless.

Also, seek feedback from key vendors on what other advertisers in your vertical are testing, since publishers are a great source for insightful competitive intelligence. And review what other advertisers are running on the vendor sites. If you see a lot of other direct response advertisers on the site, chances are that the vendor has a sales force that is built to sell direct response priced CPMs and to handle the needs of advertisers looking to back into ROI metrics.

Quick tip: In a direct response campaign, a publisher's involvement is significantly higher, so it's essential to have strong relationships with the account team to maintain constant communication about hitting goals. Some publishers now have automated optimization tools, which can be helpful in terms of communicating frequently about what's working and what's not.

Ultimately, it's important to create and implement a hands-on, transparent approach that takes into account the direct response "rules of engagement" with your vendors and your customers. Knowing these rules and building your plan around them will enable you to take your campaign and advertising relationships to new levels of success.

Tim Surowiecki is director of media services at iMarketing LTD.