The fallacy of impressions

Here's how to calculate the real impact of your advertising.

First, take all the communications you touch, yourself as a consumer, each day: the TV in the background, the unread magazines on your kitchen counter, the unwatched RSS feed at Google Reader, the 30 blogs you click on briefly and radio in your car and billboards by the highway and unopened direct mail and unwanted hometown newspapers with lots of tiny, smudgy ads.

Now, add them all up, and count how many impressions all that media claims daily with you as the root source. 1,000? 5,000?

Now, think, how many of those messages did you really consume, digest, and understand? 10? 50?

Take that percent. 1%?

Multiply that percent by all the supposed impressions in your advertising schedule.

And that's the real impact of your advertising.

UPDATE: Reader Darren found this post unfinished, so we'll explain -- the thought here is that a fraction of your ad impressions actually count. Because most people tune out the ads they see, it's a "fallacy" to think that every impression in your advertising media plan is a real one.

Now, as far as REALLY measuring the results of advertising, the best metrics are not impressions but rather cost per inquiry or cost per acquisition. For example, imagine you spend $1 million on a three-month ad campaign:

$1 million budget
@ $25 cost per inquiry
= 40,000 responses
@ 20% close rate
= 8,000 new customers
@ $125 marketing cost per sale

So if a marketer wanted to acquire 8,000 new customers, it's obvious a $1 million budget is required if she could predict her cost per inquiry and cost per sale.

Finally, by measuring each step of this funnel, you can improve output -- for example, rebalancing media to reduce the cost per inquiry will cause more customers to flow out of this equation.

Yes, damn exciting conversation for a Friday night, but we're here for you, readers.