Reach and frequency are the watchwords of media planning. Achieving the right reach and frequency is obviously a critical goal of media planning. But what is right? What is optimal?
Although marketers in all media are interested in the concept of optimal frequency, few know how to actually measure it. Common sense tells us that too few impressions won’t generate significant impact, while too many impressions delivered to a given user results in over-saturation and a waste of media dollars. So optimal frequency is simply finding an average frequency that maximizes ROI, right? Not exactly.
Over the past two years, we’ve analyzed the reach and frequency of countless campaigns and have studied the impact frequency has on conversion rates. Three insightful trends have emerged.
1. A large proportion of your impressions are going to users who have already seen too many.
If you’re buying online media on a CPM basis, the cost of impressions to users who have long passed the optimal frequency level can be significant. For example, a typical online marketing campaign with an average frequency of five delivers one-third of its impressions to users who have already received 10 ads. Here, the average frequency doesn’t capture the fact that most users only get one or two impressions, while a small group of high frequency users pull the overall average up.
2. Conversion rates typically diminish around four to six impressions.
We analyzed campaign data from 38 different advertisers to understand the impact frequency has on conversion rates. For each advertiser, we calculated click-based conversion rates at each frequency level and aggregated the results. The overall results showed the conversion rate on the first impression was the highest, and the first three impressions all had at least double the average conversion rate.
These findings may come as a surprise to many of you, but they follow one of the basic laws of direct response advertising. If a user hasn’t responded to your offer, it’s an indication that the offer isn’t relevant to him right now. Thus, rather than making another offer to the same person, you’re better off delivering that next impression to someone who hasn’t seen it yet. This is the reason maximizing reach and lowering frequency almost always increases conversion rates.
3. The most profitable frequency levels are often much higher than the most efficient frequency level.
Maximizing your conversion rates is always a critical goal. However, the frequency level with the highest conversion rate may not necessarily be the same frequency level to maximize your profits. There will always be a trade-off marketers have to manage between efficiency and volume. Restricting frequency to only one ad per user might achieve the lowest possible cost per conversion, but you may end up with a very low total number of conversions. The question then becomes, “at what level of frequency am I still meeting profitability targets on my conversions?”
This is an answerable question and depends on three variables: the conversion rate at each frequency level, the CPM of the media, and the cost-per-conversion goal of the advertiser. By applying the CPM to the conversion rates, you can calculate cost per conversions for each frequency level. As long as the conversions garnered at the higher frequency levels hit their profitability targets, marketers should be willing to pay for those impressions.
What does this combination of data, methodology and analysis buy us? In a word, results. It is important to recognize and react to the amount of money being wasted on excessive high frequency users. The culprits are not the users who consume four, five or six impressions, but rather the thousands of users who receive hundreds of impressions without any response. Basic frequency caps can translate into double digit gains from one campaign to the next.
Frequency distribution reporting from third-party ad-serving systems is one of the most valuable, yet underutilized, tools to estimate and manage the amount of waste that might be occurring. The amount of waste will vary dramatically across sites and will increase over the life of campaigns. If the amount of gross waste is significant, knowing how various caps will impact campaign performance and monitoring whether negotiated caps are truly in effect will help in planning and buying media more intelligently.
Consider performing your own statistically valid optimal frequency analysis. This will enable you to precisely identify the frequency levels that maximize total conversion yields, while still meeting your cost-per-conversion goals. It’s important to note that even within the same industry category, optimal frequency levels can vary greatly. Diverse media strategies, different demographic targets and even seasonal variables all affect the results. Only by analyzing your data in the context of your campaign strategies can you determine your optimal frequency.
Achieving optimal frequency is one of the most direct paths to reaching and exceeding profit and conversion objectives. But it can be a path that is hard to follow without the right data, the right methodology and the right insights.
Karl Siebrecht is senior vice president and general manager of Atlas, a provider of digital marketing technologies and expertise, and an operating unit of aQuantive, Inc. Find more information about the research discussed within this article here.