How do you know how well your ad is performing? How do you know if new sales were generated directly because of your ad?
Just like any aspect of business or investing, you hope that any money that you invest will generate a positive return. Otherwise it’s just an expense and a waste of your money.
If you invest in stocks you follow their performance, right? You may follow them daily, maybe weekly, maybe monthly. But you know how much money you invested in them, and you look to see how far ahead you are (profits) — or how far behind you’ve fallen (losses).
If you buy a new piece of equipment to run a particular part of your business, you are expecting that the long-run performance of the new equipment will increase your bottom line. You expect it to shorten a particular production process. Or you expect it to run the same process, but faster and more efficiently. Or produce the same quantity of output but all at higher quality.
Whatever the case, you expect the new equipment to generate higher profits by increasing revenues or reducing expenses, paying for itself several times over in the process.
You wouldn’t buy the equipment, set it in motion, and just hope for returns, would you? If you were a farmer, you wouldn’t buy an expensive new tractor and just hope that you’re making more money because it seems like you ought to be increasing your production rate, would you?
Of course not. You would measure its performance and track your sales. You would look to see if you are selling more of the product in the same timeline than before the equipment. Or you would see if you could raise your price without lowering the quantity sold since you are offering a higher-quality product.
There are a multitude of factors and variables that you would track and measure, but the point is that you would track and measure them if you are all about running a successful business.
Why wouldn’t you want to do the same thing for your advertising campaigns?
The purpose of advertising is to increase sales. To measure whether or not your ad succeeds in achieving its purpose you must have a way to directly link your ad to the sale or customer it brought in. Without that you might as well be hoping for results because you’re flying blind.
And that’s certainly not the way to higher profits.