Yesterday, at the 6th Annual Digital Pharma East conference here in Philadelphia, I met many “old” friends including Bill Drummy, CEO of HeartBeat Ideas.
Drummy’s presentation had a long and complicated title — “Outsize Results on Modest Budgets: Think You Can’t Afford World-Class Marketing on Your Limited Budget? Think Again” — but his message was simple: the ROI of online promotion is an order of magnitude greater than the “typical” 2:1 ROI for non-digital channel promotion.
“With digital you can get way more bang for your buck,” said Drummy, “so you HAVE to think of the digital channel. If you have a real insight about your target, use really bold creative, and use a lot of precision targeting and pay-for-performance techniques, you can get dramatically higher and better results.”
Drummy then said that ROI for digital ranges from 4:1 on the low end to high double digits on the high end. He’s seen digital ROIs of about 29:1 in “a number of different cases.” That’s return on investment measured by increased sales, not surrogate key performance indicators like ad impressions, clicks and Facebook likes, etc.
Drummy didn’t go into too much detail about how these ROI are measured, but he did show a blinded digital promotion case study (paid search and online display) where the ROI was about 5:1 (it was 13:1 for just paid search). The spend on that promotion was $32,000, I believe.
My question is this: Is this scalable to the point where digital promotion gives you a significant bump in sales?
A 5:1 ROI on a spend of $32,000 translates into $160,000 in additional sales. This is a small number as far as Rx sales go. A TV ad campaign spend of $100 million at 2:1 ROI results in $200 million in additional sales — now we’re talking about a real bump. At 5:1 ROI, how much money would you need to spend on search/display ads to realize a bump of $200 million? You would have to spend $40 million! I contend that it is impossible to spend that amount of money in one year on paid search and display advertising. And, if it was possible, would the ROI still be greater than the traditional, non-online ROI of 2:1?
If Drummy knows of a case to disprove this, I’d like to hear about it.
To be fair, Drummy was talking to companies with LIMITED budgets for promotion. In that case, there are probably limited sales opportunities as well. Therefore, putting your limited promotion budget into digital makes sense.
Drummy showed some examples of what he considered online campaigns that had “bold creative.” I’ll have more to say about this is a later post; right now, I have to get ready to have a chat with BI’s John Pugh over coffee and bagels!