The Impact of Predictive Targeting from Top Management Perspective

Targeting is applied science. You can fill bookshelves with knowledge about targeting, different approaches, technologies, strategies, statistics, key performance indicators, procedures, best practices, target groups, click through rates, conversion, media loss, case studies, etc., etc., etc.

But, as you already might have experienced: Top managers and decision makers are not interested in all these operative details at all. They just want to be “shown where the money is”! For top management you have to:

1.    Describe your company’s business in a simple model, using only the most important parameters
2.    Describe the qualitative impact of your solution on the parameters of the model
3.    Quantify the impact in relation to the required investment (Return-on-Investment calculation)

And this is how it looks like for Predictive Targeting:

1.    Model of your business

There are three major parameters for the monetization of a website/portfolio with advertising:
-    Available capacity (in Ad-Impressions per month)
-    Average realized fill rate (in % of capacity)
-    Average realized CPM (net!, in €)

It has proven to be practicable to split the whole inventory into three segments for a differentiated view:
-    Premium inventory (high CPM, e.g. homepages)
-    Working inventory (mid-range CPM, e.g. channels)
-    Long tail (low CPM, e.g. un-qualified content)

With these 3×3 values any website/portfolio can easily be described. Either qualitatively in a simple graph where the area below the curve equals the monetization:

Or quantitatively in form of an Excel table (fictive figures):

2.    Impact of Predictive Targeting

Predictive Targeting can have a lot of different positive impacts on your business. But there are two major ones under which most of the others can be subsumed:

I.    Increase of reach, e.g. in terms of …
-    increased fill rates
-    prolonged channels
-    a well monetised long tail
-    etc.

II.    Increase of CPM, not as targeting surcharges but e.g. in terms of …
-    new high-value products
-    increased wallet shares
-    increased eCPM
-    etc.

In the diagram the increase of reach leads to a shift of the graph to the right while increased CPMs shift the graph upwards:

The resulting arrow is what nugg.ad calls the Targeting Vector. It’s everything about predictive targeting packed into one single figure (a real KPI!). The area between the two curves finally is the increase of sales (“the money”) you get from Predictive Targeting!

3.    RoI Calculation

Now the impact needs to be quantified. Based on your individual business aims, benchmarks, experience and an analysis of weaknesses and strengths you make assumptions for the impact Predictive Targeting on each of the parameters (exemplary figures):

The result is a comprehensible benefit calculation at a reasonable effort.With these figures you are in the position to make a well-founded decision whether Predictive Targeting makes sense for your business or not. You can put the benefit in relation to the costs of a Predictive Targeting solution and make a Return-on-Investment calculation.Without such benefit calculation you couldn’t even say whether a solution is cheap or expensive. You would purely depend on gut instinct which is no good basis for budget discussions.

I would like to encourage you to take this kind of helicopter view at your business. I promise, it will be very illuminative for you!

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Tags: Impact of PT, Predictive Targeting, RoI Calculation, Targeting Vector

This entry was posted on Thursday, May 14th, 2009 at 11:48 am and is filed under Business/Strategy, Targeting. You can follow any responses to this entry through the RSS 2.0 feed.