How do I calculate the ROI of TV advertising?

Sometimes it perplexes me that we spend so much time questioning the return on investment on Internet marketing spending, but we spend almost no time asking about the ROI of the “tried and true” methods, such as television advertising. So, it was refreshing when I was approached the other day with that question, but the answer, as you might expect, is not so simple.

Image by dhammza via Flickr

The first question you need to ask is if you can calculate the ROI of any marketing spend. Many companies can’t, especially if they sell offline. While some companies have fancy CRM systems that track leads, many don’t. Even among those that do, there is the messy question of knowing where the lead comes from, which techies call attribution.
If someone watches your TV commercial, how can you capture that relationship, so that you know that the TV ad drove that lead? For some, it’s easy. If your ad is an infomercial, or ends with “Call now,” you can provide a special phone number in the ad so that everyone who calls that number is properly attributed. But what if you have a corporate feel-good commercial talking about how you are industry leader who is kind to animals? B2B companies swear by their effectiveness in raising their images with customers, but how do you know that it worked? And what if you are advertising dish soap? how do you know if someone walked into the store and bought something?
Direct marketers have struggled with this question for decades. Long before people were talking about attribution, direct marketers were designing matchback systems, to tease out answers to the same question–which customer touch contributed to this sale?
Both attribution and matchback systems rely on guesstimates–they might have rules that credit the last touchpoint (which have in the past often been search for online and catalogs for offline) with the sale. Or, one clever company I worked with attributed branded search terms to TV advertising and unbranded ones to SEO.
It’s hard enough to attribute online actions to sales, but offline advertising like TV commercials is even tougher. If you can’t use a simple trick, such as the branded vs. unbranded keywords, or the unique phone number, you need some kind of call to action. Perhaps it is a microsite with a URL that you use only in the TV ad. Whatever you do, you need to come up with some rational way of tying the ad to a customer action you can count (and then tying that action to a sale, online or offline).
Most marketers find it easier to tie the marketing tactic to a Web action, because our Web metrics systems are usually easier to use for attribution than systems for counting phone calls. Many companies don’t even have a system for logging phone calls or tracking coupons, while almost everyone has Google Analytics, at least.
And attribution doesn’t have to be 100%. Some marketers use cookies or other matching data to estimate the share of credit for each tactic. So, even though a customer might have ended by purchasing after a search, cookies can often reveal the customer was exposed to a banner ad or social media message, which should get partial attribution.
Even then, attribution is an approximation. Although we might all like it to be different, calculating the ROI of any marketing is still an art rather than a science. It’s not a one-size-fits-all undertaking, but undertake it you should. (I am starting to sound like Yoda, and my kids already think I am the same age…)