According to research from Nielsen Catalina Solutions, consumer packaged goods (CPG) brands can experience a return of almost three dollars in incremental sales for every dollar spent in online advertising that has been precisely delivered using purchase-based information.
These findings, based on what Nielsen believes to be the most in-depth study on the correlation between online advertising and offline purchase, indicate a turning point for the digital medium as marketers seek to better leverage their advertising budgets across multiple channels.
Mike Nazzaro, CEO of Nielsen Catalina Solutions, says that “… online advertising drives sales… returns on ad spends are significant when purchaser-based data is used to optimize the media buy… enabled by shopper-based analytics… “
A key metric for measuring campaign success is the ratio of the sales generated compared with the cost of the advertising, typically expressed as a cost per thousand. The incremental sales revenue per thousand households is compared with the advertising CPM to determine the return, or payback. According to Nielsen Catalina Solutions’ research, the average payback for all CPG categories was 2.79, ranging from 2.36 for food items to 5.29 for the pet category.
Payback Per One Dollar Ad Investment (Incremental Sales/Cost Per Thousand HH)
All category average
Over the counter
Health & beauty aids
Source: Nielsen Catalina Solutions, June 2012; *(Ratio of incremental sales revenue per 1000 HH [RPM] to advertising cost per thousand [CPM]; RPM/CPM=Payback)
“These findings reveal an opportunity for advertisers to increase sales by leveraging purchaser data to improve media planning and buying. CPG marketers spent over $22 billion in total advertising in 2011, including $2 billion to $3 billion in the online medium,” Nazzaro said.
Nielsen Catalina Solutions and Nielsen completed more than 800 studies over the past seven years, collaborating with more than 300 CPG brands and 80 companies to measure the correlation between online advertising and offline consumer purchases