Home Entrepreneur Why referrals from friends are still the key in the digital world

Why referrals from friends are still the key in the digital world


April 15, 2021

7 minutes of reading

This article is translated from us Spanish edition using AI technology. Errors can persist due to this process.

Comments expressed by Businessmen the contributors are their own.


Last year as well A pandemic is about to begin I took on the role of CEO of a technology platform made up of brand ambassadors and influencers: VoxFeed . Since I had no experience in the digital marketing world, I immediately started investigating this by interviewing brand managers, agents, among other experts to get an idea of ​​what to expect. how the market works.

I immediately noticed something strange. It seems that no one can or is willing to explain the real return on their investment in digital marketing campaigns. I got confusing answers about engagement rate, reach, sentiment, etc. and all of that makes less sense when it comes to “display” or “expression” type ads. language “. Display is an online advertising format in which ads are displayed as banners on landing pages.

If, hypothetically, you’ve spent 20 thousand pesos on these ads above Facebook or Google What is the real and measurable impact on the number of sales or the number of customers that have made it? I can never get a direct answer. So I started to study the available statistics, not by company, but by industry as a whole. The results I found and the conclusions they pointed out was quite shocking.

Is it possible that the majority of the money spent on digital marketing is NOT having a measurable effect? Crazy statement, but stay with me. I’m not talking about All marketing, almost 60 billion dollars according to Statista.

Consider the following: For every 1,000 banners displayed, the SIX of which receives a click (= 0.6%). 60 percent of THOSE clicks are reported as errors (thumbs), so we’ve now reduced intentionally clicked display ads to 0.036 percent. You’re 475.28 times more likely to survive a plane crash (either twins or win the lottery) than clicking a display ad. By 2020, 42.7% of users are using ad blockers (and this number is still growing year after year) – meaning that nearly half of all spending is on ads that no one will ever see. Without an ad blocker, the average person in the United States is exposed to between four thousand and 10 thousand ads… per day! Do you think ads that follow you everywhere are effective? Are not. Once an ad is viewed 40 times or more, the impact on sales is really negative. Surprisingly, it turns out that people don’t like it when they follow them and follow them all the time.

With these numbers, it’s clear that banner ads are a waste of time and no one should bet on them, right? Mistake! Display ad spend makes up the bulk of total digital spend, and according to Statista, is expected to grow by more than 11% by 2021. How could this happen? Why do we spend so much when we get too little?

I have one theory: have you heard the story of frogs in boiling water? The temperature of the water rises so slowly that the frog doesn’t notice the change until it turns into frog soup. Likewise, we are frogs.

Display ads are new. Because there are very few of them, the clickthrough rate (CTR) is excellent (the first banner ad had a click-through rate of 44%!). As word spread and more and more advertisers started using them, we developed ad blindness in common.

As the channel becomes saturated, its effectiveness diminishes but steadily declines until it ends at its current position: very close to zero. Then a pandemic happens and people invest in advertising. In the real world (billboards, flyers, etc.) turned their budgets to digital advertising as we all started spending countless hours staring at our screens due to the lockout.

Spending on digital ads skyrocketed, ad saturation becomes super-saturated, and response (CTR) drops 45%. So we spend more on banners and screens and we get less. That fact seems undeniable. But the big question is: Why isn’t anyone willing to point the elephant in the room? What’s going on here? Is that a global conspiracy? Have we lost our shared memory yet? I suspect the answer is much less compelling and has been in front of us all this time. Almost none of those who make a spending decision are interested in looking too closely at ROI.

Big companies allocate budgets to Marketing Directors and it is then filtered out to individual brand groups and brand managers. Most display advertising purchases are done through major marketing agencies, either directly or through programmed platforms. No one on that chain would benefit from pointing out that the millions of dollars spent had virtually no effect on purchase behavior. In fact, they don’t want to know. That is not you CAN NOT Calculating the impact on sales, that’s just the answer you can come up with will suggest to stop. We don’t know because we don’t want to know. I know what you’re thinking: As a novice in the industry, I don’t know enough about how it works to make these claims.

Okay, that’s fair, but if you take a step back, get rid of common words and just look at the most basic data honesty, you have to conclude that something is wrong. We spent $ 160 billion in 2019 on display ads, is the intentional clickthrough rate on those ads around 0.03%? I couldn’t find any data showing that that money had any impact on purchase behavior.

However, some companies are realizing this and are choosing to go back to the basics instead of banners: Recommendations .

According to Nielsen, 92% of people around the world say they trust referrals from friends and family more than other forms of advertising.

The reality is that no one likes to be sold, but we recommend that you do. That is why 9 out of 10 consumers say they try a new product when introduced by acquaintances compared with 2 out of 10 who do so when relying on digital advertising.

For this reason, more and more brands are choosing to invest in referral marketing strategies and make their satisfied customers an active part of their campaigns.

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