In digital video advertising, marketers have traditionally relied on the medium to deliver branding objectives rather than focusing on sales goals. However, our recent research revealed that digital video is at the inflection point of its adoption curve: It's moving from a branding tool to a sales and branding tool.
We see, at its simplest, three reasons for this change, as evidenced by our qualitative and quantitative survey of 200+ brand marketers in retail, CPG, auto, and travel:
- Marketers are under constant pressure to deliver improved sales returns, which a recent Russell Reynolds report directly linked to increased CMO turnover.
- Recent developments in attribution analytics are providing more granular measurement of sales-lift, to a point where this evolving tool can finally identify the specific sales contribution of digital video.
- Advertisers are learning that mastering four key skills will lead to strong digital video ROI.
- Digital video will become a key revenue generator for marketers. Fully 65% of marketers say digital video is growing in importance for driving offline sales, the study found. That near-future view contrasts with the current situation: Marketers are more likely to view digital video as a branding tool, with more than half seeing it as a superior tool for building brand awareness and favorability, telling their brand's story, and connecting with consumers emotionally.
- Marketers' perceptions of digital video are shifting. The study showed a disconnect between marketers' perceptions and their experience with digital video: 87% reported enjoying positive ROIs with the medium, but only 42% think it's better than other mediums at driving sales. It seems that perceptions have not yet caught up with the hard facts and marketers' actual experience.
- The evidence shows strong potential for digital video to drive ROI. The hard behavioral evidence made clear that embracing the power of targeting, personalization, effective creative, and learning through behavioral ROI analytics are key to successful digital video ROI activation.
We also know that specific strategies can drive digital video performance even higher. Nielsen Catalina Solutions (NCS) reports that targeting digital video increases performance by 27%. In individual case studies at NCS, return on ad spend (ROAS) with digital video soars to $3 and $4 when targeting is combined with personalization. A national home improvement retailer generated a $6 ROAS with that combination, as measured by MasterCard Advisors. Moreover, a large regional Honda dealer association's ROI was as high as $7.83, as measured by J.D. Power—and that's in bottom-line returns, not top-line—with targeted, personalized digital video.
Here are ways that brands that can master these capabilities and drive higher ROI for their marketing expenditures.
ROI Results Are Driving Change
Most marketers see the powerful attributes of digital video, such as how well it fits with today's emphasis on data, targeting, efficiency, and programmatic and its tracking and personalization capabilities, which are very similar to search and display. They also say that digital video has a strong ROI.
Despite their knowledge of its positive capabilities, marketers are not as quick to acknowledge digital video's power to drive sales. Only 42% of marketers consider digital video a superior tactic for driving sales, even though 87% report seeing positive ROI with the medium. So why the disconnect?
One of the barriers we found is that measuring sales lift and ROI for digital video has been difficult. Marketing mix models have not been sufficiently sensitive for nuanced ROI attribution. However, more granular techniques are documenting the sales performance of this medium. In addition, the majority of marketers we surveyed expect to have hard financial KPIs in place within the next year or two around digital video, and the evidence in our research indicates that digital video can perform well on those KPIs.
And it's just in time: 74% of marketers say they will shift more money into digital video when they see evidence of its ability to drive online sales, and 60% echo this sentiment for offline sales.
Marketers hesitance to grant video the sales-generating powers they've seen with other mediums is odd, considering the high percentage of marketers who had a positive ROI experience with digital video, and many of them report very strong ROI levels.
The hard evidence is even more compelling. In a recent industry study, NCS reported that its database of 1,400 cases, including 450 brands, shows an average sales lift for digital video of $23.48 per thousand exposures—higher average sales lift than any other medium in the database.
Considering marketers' statements that they would shift funds to digital video when they see the evidence of its ability to profitably generate sales, and recent ROI and ROAS case studies, we expect to see more marketers perceiving and adopting digital video as a sales tool for their marketing strategies.
How Will This Process Unfold?
We expect to see a nuanced story in the year or two ahead, and it will vary by industry sector:
- The travel industry is already using digital video as a sales driver. Most travel marketers we surveyed already see digital video as a superior sales driver, which could be because it is already a data-rich environment. Travel bookings moved online fairly quickly compared with the path to purchase in other industries. These marketers recognize that digital video can be personalized via behavioral targeting and that it works well at the top and bottom of the purchase funnel. Experience shows the medium can close deals in their industry. They have had good ROI experience in the $2-3 range, and they would shift money from email and social to increase digital video capabilities in the future. For the travel industry, digital video is an upgrade to current digital marketing.
- Automotive marketers see digital video as a way to drive traffic to showrooms. Dealerships determine the success of marketing tactics by how many people visit their locations. Most automotive marketers say they would shift funds from TV and radio if they saw even more evidence that digital video drives showroom traffic and sales. They are aware that personalizing video messages is key to successful performance, but they seem to need more evidence of digital video's ability to contribute to the sale itself. That might be explained by the fact that they report both the lowest and highest ROI experiences in the study.
- Retailers see digital video as another marketing option—but affecting only the digital ecosystem. Building awareness and driving more online sales would motivate retail marketers to invest more in the medium. They would shift money from search and OOH if they saw even better performance at driving digital traffic, but there was little focus on offline sales. That sentiment could be an artifact of the organizational structure of retailers, wherein digital people are only digital people and store people are store people.
- CPG marketers are still learning how to use digital video to drive sales—and their ROIs show that. They continue to see digital video as a branding tool for motivating shoppers, and they measure performance with traditional brand metrics. They are unfocused about where the money should come from, and often fall back to a very traditional approach to optimize it—reach and frequency. However, they do know digital video holds great promise. Unlike the other verticals we analyzed, CPG marketers have an additional hurdle: The retailer stands between them and their consumer, which complicates their marketing and ROAS measurement.
The road ahead seems clear: Digital video's best-practices are becoming increasingly apparent—and, with them, ROI performance is improving. We see digital video increasing across the board for brands and marketers, but the paths will be different for different industries.
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