You stare down the cover of an exercise book, determined to make good on that New Years resolution, five months late or not. The woman on the front clearly eats nothing but flaxseed and grapefruits and must lift weights 6 days a week.
The question to wonder right at this moment is: is she fit because she’s a workout instructor? Or did she decide that was her career of choice because she was fit, in the first place? Or does it have nothing to do with either? Perhaps steroids are her drug of choice.
These same questions (well, not necessarily the same ones) should be considered when it comes to media spend and sales revenue, according to the Senior Vice President of Organic, Steve Kerho. We can thank Organic for the online banner ad, the first mobile ad and the first Youtube channel (according to Wikipedia, at least).
Steve explains that it can be difficult to discern whether your media spend is really affecting the revenue, so he suggests taking a look at the method called Granger Casuality (developed by Nobel Prize winning economist Clive Granger). Here is a list of possible connections between media spend and sales, as illustrated by this G-Causalty:
- Media spend caused sales: This is what you’d be hoping to hear. To test this, you would observe what happens when, over a period of time, media is given a bigger budget (you can also look back over past budget and revenue reports).
- Sales caused media spend: In this case, adding to media spend would show no increase in sales. However, when sales increase, there would be an increase in media spend. Steve explains that, “[t]his would indicate that media budgets are driven by prior sales levels.”
- An unknown third factor caused sales to occur: This is when there’s no increase in either one of the previous tests. Time to search for variables.
- Media and sales give each other “positive feedback”: This is the case when both test 1 and 2 show an increase. It’s like the snake that eats it’s tail (which, if you weren’t already aware, is called an ouroboros,).
- Last month’s sales were a coincidence: Sometimes the world just doesn’t make sense, yo.
Whether you care or not to figure out if that exercise lady is on the ‘roids or not, is your decision. But, I think taking a bit of time to closely scrutinize if the money you pour into sales and marketing is coming to fruition, is a fabulous idea.
My source and where to find more details on G-Casuality: Untangling The Complex Relationship Between Media Spend And Sales
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