All brands can gain consumer respect. But how do you identify which elements you need to put in place to become a part of the brandthread of people’s lives’? A brand doesn't just get respect, it depends on three criteria:
Performance
Does the brand offer better quality in comparison with its competitors?
Does the brand strive constantly for innovation, improvement and flawless service?
Do you have the feeling you're getting value for money?
Trust
How trustworthy is the brand?
Can you always count on the brand?
Does the brand always meet your expectations?
Reputation
What is the brand's reputation like? Is it a leader in its category?
Is the brand honest and does it own up to any mistakes?
Does the brand operate as a “good citizen” and does it work for a better world?
For brands to become part of peoples’ lives' they need to use these life pillars (Language, Music, Fashion, Sports, Food, Family, Activities) to diffuse their message. Brands must associate with these pillars, each of which can influence one another:
Creating Interest
Are there any brand myths?
Does it have a rich tradition and history?
Does the brand make you dream?
Does the brand have a recognizable logo, symbol or icon?
How much does the brand play on the senses?
Thread of People’s Lives'
How close to its consumers can the brand get?
Is there two-way communication between the brand and the consumer?
Does the brand exhibit interest in its consumers and their individual needs?
Monday, June 23, 2008
Saturday, January 12, 2008
When Targeting Multicultural Audiences
Doing It Wrong Is Worse Than Not Doing It at All
When it comes to making ads relevant for multicultural audiences, doing it wrong is worse than not doing it all.
A new study from OMD Worldwide found that ethnic groups are turned off by ads that rely on stereotypes and caricatures rather than meaningful cultural cues. "The respondents were saying, 'We want to see ourselves represented in ads, but not in a stereotypical matter,'" said Pamela Marsh, group director-primary research and insights at the Omnicom media agency.
Multicultural Consumer behavior
The OMD study, a telephone survey of 1,453 respondents 18 and older, sought to understand how ethnicity affects consumer behavior and advertising receptivity. Four different groups were represented: blacks, Asian-Americans, Hispanics and the general market (which was about 76% Caucasian in the study).
The ethnic groups agreed that messages should be culturally relevant, but they responded more positively to ads with multicultural cues, such as ethnic characters, phrases, expressions and values, than ads that were simply translations of general-market ads. "Ad relevancy is more about communicating in kind than speaking in a language," Ms. Marsh said. Cultural relevance is also important for media placement, the study said, noting that ad models created on the basis of general population statistics, such as channel planning, are likely to fall short if they do not take relevant ethnic differences into account.
How to Reach Multicultural Segments
Though all segments in the survey gravitated toward the same top four media -- TV, radio, internet and mobile -- different ethnic groups spent different amounts of time with each of them. Blacks, for instance, spent the most time with TV; Hispanics spent more time with radio; and Asians used the internet at significantly higher rates.
The study also found that black consumers place a higher premium on word-of-mouth information before making buying decisions -- particularly when seeking feedback about a product. Asian-Americans also rely heavily on word-of-mouth because they are less receptive to ads than other segments of the population, according to the study.
Marketers have a significant opportunity to influence the purchases of blacks and Hispanics, the study said, because they are more open to advertising than other groups but feel as though most marketing messages are not relevant to them.
When it comes to making ads relevant for multicultural audiences, doing it wrong is worse than not doing it all.
A new study from OMD Worldwide found that ethnic groups are turned off by ads that rely on stereotypes and caricatures rather than meaningful cultural cues. "The respondents were saying, 'We want to see ourselves represented in ads, but not in a stereotypical matter,'" said Pamela Marsh, group director-primary research and insights at the Omnicom media agency.
Multicultural Consumer behavior
The OMD study, a telephone survey of 1,453 respondents 18 and older, sought to understand how ethnicity affects consumer behavior and advertising receptivity. Four different groups were represented: blacks, Asian-Americans, Hispanics and the general market (which was about 76% Caucasian in the study).
The ethnic groups agreed that messages should be culturally relevant, but they responded more positively to ads with multicultural cues, such as ethnic characters, phrases, expressions and values, than ads that were simply translations of general-market ads. "Ad relevancy is more about communicating in kind than speaking in a language," Ms. Marsh said. Cultural relevance is also important for media placement, the study said, noting that ad models created on the basis of general population statistics, such as channel planning, are likely to fall short if they do not take relevant ethnic differences into account.
How to Reach Multicultural Segments
Though all segments in the survey gravitated toward the same top four media -- TV, radio, internet and mobile -- different ethnic groups spent different amounts of time with each of them. Blacks, for instance, spent the most time with TV; Hispanics spent more time with radio; and Asians used the internet at significantly higher rates.
The study also found that black consumers place a higher premium on word-of-mouth information before making buying decisions -- particularly when seeking feedback about a product. Asian-Americans also rely heavily on word-of-mouth because they are less receptive to ads than other segments of the population, according to the study.
Marketers have a significant opportunity to influence the purchases of blacks and Hispanics, the study said, because they are more open to advertising than other groups but feel as though most marketing messages are not relevant to them.
Win Back Inactive Subscribers
A reactivation campaign can help you revitalize your list
How many email messages did you send out in your last campaign? Really? That many? Wow! Now, how many of your recipients actually opened or clicked on your email?Yeah, that's a different story. Remember that with email, size doesn't really matter. Performance is what counts, not just for your email program and its bottom line but also for your sender reputation.
A reactivation campaign is the answer here, and it's just as important as any acquisition campaign. It will help you clean out the dead wood, re-energize your list and reclaim some of the money you spent acquiring and engaging those addresses in the first place.
Why reactivation works: Your email service provider might be thrilled that you ship out millions of messages in each campaign, but you could actually hurt yourself and your sender reputation and spend money you don't have to when you send to people who never bother to open or act on your messages.
Sure, maybe they did sign up with you once upon a time. Since then, though, they abandoned those mailboxes, and you never noticed. The ISPs are noticing, and they'll treat your email accordingly.
Many use these long-dead email addresses as spam traps to monitor your list hygiene and measure your sender reputation. The dirtier your list, the more likely they'll route your email messages to the junk folder or block you.
Just by looking at your database, you can't tell which subscribers actually abandoned their mailboxes, who deletes your messages without opening them or who still is sort of interested in you but hasn't seen any reason to open.
A reactivation campaign will identify which addresses you can safely drop from your list without killing off live ones and re-establish connections with past customers. Think of it as going on a second honeymoon. Just like a tired marriage needs a spark to keep it going, your subscribers who take you for granted need a fresh, new reason to keep opening your messages.
You know you get the most action from your newest subscribers. Apply the tactics you use on them to rejuvenate the inactives on your list instead of spending more money to replace them.
Ready with the virtual flowers and candy?
First, identify your inactives. This takes a little database work. Create a separate mailing list, and add anyone who hasn't opened or clicked on a message in, say, six months or longer, to it. Send a message with a pleading subject line, such as "We miss you! Please come back!" Go ahead, grovel a little. Include a special offer or invitation to fill out a new profile or encourage them to unsubscribe once and for all.
Move any responding addresses back to your active list. Send the message again, this time saying you'll take them off your list if they don't respond in, say, a week. Then, scratch them from your list if they don't respond. It might kill you to do that, but a smaller, more vital list will do you more good than one where nobody's home anymore.
Keep everybody interested...
These tactics will keep your whole list engaged and energized:
1. Ask them what they want to get. It could be you have lots to offer, but your subscribers aren't getting what they really want. For example, if you're a book seller it may be that someone subscribed to your general list is really only interested in mysteries. Ask recipients to take control of what they want to get, and you may see renewed interest.
2. Make them an offer they can't refuse. Discounts, new products, samples and free shipping can work wonders for retailers. B2B marketers can renew interest with a special white paper or discount on a conference or webinar.
3. Incentivize! Ask users to update their profile, and give them a chance to win a big-screen TV. (iPods are, well, kind of over unless it's a really upscale one.) Be careful to keep the focus on the email, though. If the prize is too good, people will re-engage, only to click the spam button when your email actually arrives.
4. Threaten to break up. Tell subscribers if they don't click, you're going away. It's possible that your heavily texted message is in fact being read, but you can't know it because recipients don't enable the images. It's fair to say that if recipients don't let you know somehow that they're still there, still breathing, that you'll drop them from the list.
5. See what's on their minds. Simple surveys, sweetened with a little incentive (see No. 2), can help you find out what's going on. Maybe you're sending too often and they turn a deaf ear. Or, you're not coming around enough and they drift away.
6. Change your format. Are you sending long, chatty emails to people who read them on their phones and don't get down to your offer? Or, do you stuff all your content into a single large image that won't show up? Offer a text format to people who read email on alternative platforms and make it short and sweet.
The effort you spend now to wake up your list and re-engage with them will pay off in better deliverability and a higher ROI.
How many email messages did you send out in your last campaign? Really? That many? Wow! Now, how many of your recipients actually opened or clicked on your email?Yeah, that's a different story. Remember that with email, size doesn't really matter. Performance is what counts, not just for your email program and its bottom line but also for your sender reputation.
A reactivation campaign is the answer here, and it's just as important as any acquisition campaign. It will help you clean out the dead wood, re-energize your list and reclaim some of the money you spent acquiring and engaging those addresses in the first place.
Why reactivation works: Your email service provider might be thrilled that you ship out millions of messages in each campaign, but you could actually hurt yourself and your sender reputation and spend money you don't have to when you send to people who never bother to open or act on your messages.
Sure, maybe they did sign up with you once upon a time. Since then, though, they abandoned those mailboxes, and you never noticed. The ISPs are noticing, and they'll treat your email accordingly.
Many use these long-dead email addresses as spam traps to monitor your list hygiene and measure your sender reputation. The dirtier your list, the more likely they'll route your email messages to the junk folder or block you.
Just by looking at your database, you can't tell which subscribers actually abandoned their mailboxes, who deletes your messages without opening them or who still is sort of interested in you but hasn't seen any reason to open.
A reactivation campaign will identify which addresses you can safely drop from your list without killing off live ones and re-establish connections with past customers. Think of it as going on a second honeymoon. Just like a tired marriage needs a spark to keep it going, your subscribers who take you for granted need a fresh, new reason to keep opening your messages.
You know you get the most action from your newest subscribers. Apply the tactics you use on them to rejuvenate the inactives on your list instead of spending more money to replace them.
Ready with the virtual flowers and candy?
First, identify your inactives. This takes a little database work. Create a separate mailing list, and add anyone who hasn't opened or clicked on a message in, say, six months or longer, to it. Send a message with a pleading subject line, such as "We miss you! Please come back!" Go ahead, grovel a little. Include a special offer or invitation to fill out a new profile or encourage them to unsubscribe once and for all.
Move any responding addresses back to your active list. Send the message again, this time saying you'll take them off your list if they don't respond in, say, a week. Then, scratch them from your list if they don't respond. It might kill you to do that, but a smaller, more vital list will do you more good than one where nobody's home anymore.
Keep everybody interested...
These tactics will keep your whole list engaged and energized:
1. Ask them what they want to get. It could be you have lots to offer, but your subscribers aren't getting what they really want. For example, if you're a book seller it may be that someone subscribed to your general list is really only interested in mysteries. Ask recipients to take control of what they want to get, and you may see renewed interest.
2. Make them an offer they can't refuse. Discounts, new products, samples and free shipping can work wonders for retailers. B2B marketers can renew interest with a special white paper or discount on a conference or webinar.
3. Incentivize! Ask users to update their profile, and give them a chance to win a big-screen TV. (iPods are, well, kind of over unless it's a really upscale one.) Be careful to keep the focus on the email, though. If the prize is too good, people will re-engage, only to click the spam button when your email actually arrives.
4. Threaten to break up. Tell subscribers if they don't click, you're going away. It's possible that your heavily texted message is in fact being read, but you can't know it because recipients don't enable the images. It's fair to say that if recipients don't let you know somehow that they're still there, still breathing, that you'll drop them from the list.
5. See what's on their minds. Simple surveys, sweetened with a little incentive (see No. 2), can help you find out what's going on. Maybe you're sending too often and they turn a deaf ear. Or, you're not coming around enough and they drift away.
6. Change your format. Are you sending long, chatty emails to people who read them on their phones and don't get down to your offer? Or, do you stuff all your content into a single large image that won't show up? Offer a text format to people who read email on alternative platforms and make it short and sweet.
The effort you spend now to wake up your list and re-engage with them will pay off in better deliverability and a higher ROI.
Wednesday, December 05, 2007
Breaking Through Online Clutter - Roadblocking
Expanding the online advertising market is the goal for advertisers and agencies...
What does this all mean?
Budgets – $60b-$80b by the end of the decade indicates a paradigm shift from traditional media to digital.
DR Vs. Branding – At least ½ will be spent on DR… but now a sizeable amount is dedicated to branding.
Clutter, Lots of Clutter – Bigger budgets means more competition. It’s going to be difficult to stand out and differentiate one brand from another.
So how do we break through the clutter?
Creative Creative – Good creative will always prevail
Creative Media – Put your creative in front of the correct audience
Premium media – Get greater reach with premium media spots
Roadblocking – Eliminate all distractions; own the page!
Breaking Through the Clutter - The ingredients of a Good Roadblock:
- Product Release Proximity - High Impact
- Short and Precise Time Window – Surgical strikes
- Cross Media Buy – Own a page, section or site
- Synchronized Creative Execution – 1 + 1 = 3; the sum is greater than its parts
- Smooth Production Process – Seek a solution where both units can be proofed together
- Real Time Monitoring – Time is the essence, Roadblocks often run only a day, making real time reporting critical
No Competition = No Clutter
Examples of good Roadblocks:
Tuesday, December 04, 2007
U.S. Evolving Buying Power Markets
In prior decades, researchers primarily defined the population by age group. This worked well because of our rather homogeneous society. Today, America is evolving into a more balanced melting pot of people from different backgrounds with varied lifestyles and preferences.
How does this change affect how we define and examine our population? We have to view it through different filters called buying power markets. A buying power market is a homogeneous group of people who have increasingly defined needs and demands along with broadening purchasing power. To qualify, a group must be large enough to attract the attention of marketers, retailers and advertisers. This type of market does not stand alone; it often has influence over or within other markets. This overlap becomes apparent in the following descriptions.
Women
Women (females over age 18), the largest of today’s buying power markets, spans every generation from the matures to the echo boomers. It also crosses ethnic and sexual preference groups. Why pay so much attention to women as a whole? Because, although this group makes less than one-half of all household income, it influences over 80 percent of dollars spent. This adds up to a hefty $3.4 trillion per year. Women make more decisions than men do about cars, tires, financial services and personal computers. As buyers, they pay more than men and are less likely to haggle over price.
What future changes do we see for this market? Over the next 10 years, the percentage of women who work is expected to increase by 16 percent, while the number of working men will increase only eight percent. Women currently make up 45 percent of the total workforce; 62 percent work at least part time.
Ethnic Markets
We have three major buying power markets – black, Asian, Hispanic – emerging within our ethnic population. Today, one in four Americans is considered a minority, up from one in five during 1980. At current growth levels, 47 percent of our population will be what has traditionally been termed a minority by the year 2050.
America’s black population, currently at 34 million (12.6 percent of Americans), wields $500 billion of purchasing power. This market grew by 13 percent in the last decade. While the average household income is $14,000, households with annual incomes above $60,000 are the fastest growing income segment.
Hispanics’ purchasing power stands at $350 billion. There are currently 30 million Hispanics, 11 percent of our population. Their presence in the workforce is expected to increase 36 percent in the next 10 years compared to an increase in the national workforce of only 12 percent.
The Asian population, currently less than four percent of Americans, has doubled since 1980. These 10 million people have $150 billion purchasing power and are the fastest growing, most diverse and most affluent minority group. Their median household income is $36,000.
To attract the attention of these ethnic groups, throw out the traditional five P’s of marketing (product, price, promotion, placement and profit) and concentrate on passion, preparation, perseverance, recognition, relevance, respect and relationships.
Gay/Lesbian/Bisexual/Transsexual (GLBT) Market
America also has an emerging GLBT market that currently comprises seven percent of our population. This market is geographically concentrated with lesbians choosing to live in the suburbs and males favoring the inner-city life. These well-educated individuals boast high levels of disposable income ($200 - $400 billion) and travel frequently, both domestically and abroad.
People in this market tend to support and elect each other. While afraid of being called different, this market is proud of its uniqueness in signs, symbols and fashion. In fact, this market is often a trend setter in terms of fashion, visual arts, literature, home style, healthcare access and entertainment.
An increasing propensity for Americans to accept these individuals into the mainstream has made it easier to identify and reach this affluent and influential market.
Effects on Research
How is the emergence and evolution of these buying power markets affecting market research? Several ways—since mainstream research now considers and researches these markets as a valuable piece of the big puzzle.
The segmentation process is more complex because research results are stratified in more ways than before. You no longer rely on gender or household income delineations alone. Now, a typical stratification looks more like “women in upscale families with teenagers” or “economically challenged Asian urban families.” It is critical that we explore statistical correlations according to complex clusters.
Research tools must have more demographic categories today. For example, a person may be several races; people living in a household may not be related. Therefore, questionnaires should be designed to handle these cases.
We must explore larger samples. This is especially true in larger metropolitan markets where you must complete enough surveys (often through oversampling procedures) to permit statistical analysis of smaller or more complex subgroups. For example, your sample must be large enough to collect and compare information on wealthy women who are white, Hispanic or black all living within one geographic area.
Recognizing and reacting to change is essential for success. As the American population changes, so must our emphasis on and evaluation of key buying power markets.
How does this change affect how we define and examine our population? We have to view it through different filters called buying power markets. A buying power market is a homogeneous group of people who have increasingly defined needs and demands along with broadening purchasing power. To qualify, a group must be large enough to attract the attention of marketers, retailers and advertisers. This type of market does not stand alone; it often has influence over or within other markets. This overlap becomes apparent in the following descriptions.
Women
Women (females over age 18), the largest of today’s buying power markets, spans every generation from the matures to the echo boomers. It also crosses ethnic and sexual preference groups. Why pay so much attention to women as a whole? Because, although this group makes less than one-half of all household income, it influences over 80 percent of dollars spent. This adds up to a hefty $3.4 trillion per year. Women make more decisions than men do about cars, tires, financial services and personal computers. As buyers, they pay more than men and are less likely to haggle over price.
What future changes do we see for this market? Over the next 10 years, the percentage of women who work is expected to increase by 16 percent, while the number of working men will increase only eight percent. Women currently make up 45 percent of the total workforce; 62 percent work at least part time.
Ethnic Markets
We have three major buying power markets – black, Asian, Hispanic – emerging within our ethnic population. Today, one in four Americans is considered a minority, up from one in five during 1980. At current growth levels, 47 percent of our population will be what has traditionally been termed a minority by the year 2050.
America’s black population, currently at 34 million (12.6 percent of Americans), wields $500 billion of purchasing power. This market grew by 13 percent in the last decade. While the average household income is $14,000, households with annual incomes above $60,000 are the fastest growing income segment.
Hispanics’ purchasing power stands at $350 billion. There are currently 30 million Hispanics, 11 percent of our population. Their presence in the workforce is expected to increase 36 percent in the next 10 years compared to an increase in the national workforce of only 12 percent.
The Asian population, currently less than four percent of Americans, has doubled since 1980. These 10 million people have $150 billion purchasing power and are the fastest growing, most diverse and most affluent minority group. Their median household income is $36,000.
To attract the attention of these ethnic groups, throw out the traditional five P’s of marketing (product, price, promotion, placement and profit) and concentrate on passion, preparation, perseverance, recognition, relevance, respect and relationships.
Gay/Lesbian/Bisexual/Transsexual (GLBT) Market
America also has an emerging GLBT market that currently comprises seven percent of our population. This market is geographically concentrated with lesbians choosing to live in the suburbs and males favoring the inner-city life. These well-educated individuals boast high levels of disposable income ($200 - $400 billion) and travel frequently, both domestically and abroad.
People in this market tend to support and elect each other. While afraid of being called different, this market is proud of its uniqueness in signs, symbols and fashion. In fact, this market is often a trend setter in terms of fashion, visual arts, literature, home style, healthcare access and entertainment.
An increasing propensity for Americans to accept these individuals into the mainstream has made it easier to identify and reach this affluent and influential market.
Effects on Research
How is the emergence and evolution of these buying power markets affecting market research? Several ways—since mainstream research now considers and researches these markets as a valuable piece of the big puzzle.
The segmentation process is more complex because research results are stratified in more ways than before. You no longer rely on gender or household income delineations alone. Now, a typical stratification looks more like “women in upscale families with teenagers” or “economically challenged Asian urban families.” It is critical that we explore statistical correlations according to complex clusters.
Research tools must have more demographic categories today. For example, a person may be several races; people living in a household may not be related. Therefore, questionnaires should be designed to handle these cases.
We must explore larger samples. This is especially true in larger metropolitan markets where you must complete enough surveys (often through oversampling procedures) to permit statistical analysis of smaller or more complex subgroups. For example, your sample must be large enough to collect and compare information on wealthy women who are white, Hispanic or black all living within one geographic area.
Recognizing and reacting to change is essential for success. As the American population changes, so must our emphasis on and evaluation of key buying power markets.
Thursday, August 09, 2007
Ad Strategy in Social Media
If you use traditional media assessment formulas to plan an ad strategy in the new world of social media, you're making a big mistake. Here's why. If you knew of a way to drive lower cost-per-conversion rates for your online advertising campaigns, while super-charging ad performance, wouldn't you tell your media buyers to adopt that method, pronto?
Advertising against social media (on blog sites or within social networks) promises far better returns than traditional online content, but many advertisers are struggling when it comes to tapping into the power of these user-generated content (UGC) networks.
Social media -- in which word-of-mouth communication reigns -- is unparalleled at building passionate networks of like-minded people, particularly in the blogosphere. Of course, the nebulous world of social media is also a thorn in advertisers' collective sides due to a variety of reasons, not the least of which is the unpredictable content it generates and the difficulty in accurately measuring its impact.
Why is social media so hard to corral and measure? One reason is that the people creating the kind of influential content that impacts consumer behavior aren't necessarily the people who claim the most eyeballs. An "influencer" may have a small audience from a numbers' standpoint but can also have a massive impact on your target customers' buying habits.
The recent Nielsen//NetRatings announcement about the new "time spent" metric underscores this issue. The industry shift away from the page view as the unrivaled metric king demonstrates that the number of hits on a website doesn't necessarily equal the most value for your advertising dollar.
Since the most influential blogs don't always have the biggest audiences, traditional online advertising models can be far off the mark when it comes to reaching the most qualified leads.
For example, an ad buy targeted to a search result is unlikely to place you in front of networks of people with a passion for the product or service you're offering. However, a blog that draws together a community of like-minded readers -- who engage in discussions and share ideas and opinions -- has the loyal audience that can significantly drive up conversion rates.
Initial research bears this out: A recent study from BlueLithium Labs compared ads on sites with UGC, and sites without such content. The ads on non-UGC sites had a 32 percent higher conversion rate; however, due to the lower cost of advertising on UGC sites, the cost-per-conversion for non-UGC sites was 58 percent higher.
Advertisers are sensing this promise. The latest research from eMarketer shows that ad spending on websites that feature UGC (like photo and video sharing) is expected to rise to $4.3 billion by 2011.
The key is for advertisers to define the kind of social media (blogs, for example) that best fits their overall brands and specific campaigns, then design an effective way to surface the content that will truly deliver from an ad perspective.
Finding the people who influence consumer behavior
Locating influencers is a tough online challenge, especially in an internet landscape characterized by traditional media, UGC, social networks and 12 million blogs in the United States alone. Popularity ranking and subjective authority evaluations of a particular website or blog fall short when you take a closer look. A blogger who is considered an authority on a given topic might hold great influence when it comes to that subject but could have less or zero influence if a new topic is introduced. Likewise, a specific web page may be "popular" but ranks very low on the influence scale on a specific topic within a certain context.
A year or so ago, online marketers were advised to listen to online conversations in order to gauge what was being said about their products. Listening will always be critical, but as social media matures as a marketing channel, zeroing in on the content to actually engage with it is becoming increasingly important for brands.
Fortunately, new technologies are making it easier to find the influencers who matter more quickly. And some marketers are finding that, when it comes to social media, simply building relationships with online opinion leaders can create marketing events that deliver measurable business impact.
Screenlife Games, a Seattle-based maker of DVD games, recently used influence-targeting technology to build awareness of the 2007 edition of its "American Idol" game, based on the TV series of the same name.
Screenlife was able to hone in on blogs most likely to attract potential buyers of the game. This was accomplished by searching for conversational phrases specific to the 2007 season, such as "Melinda is the best," that would indicate the presence of a dedicated crowd of "American Idol" fans, or fans of Screenlife games, and not just a blog that mentioned the "Idol" show once or twice.
"We're able to catch general fans of the show and focus in on specific conversations about our game," explains Tony Roscelli, Screenlife's director of consumer research. "We can find out what they like and parlay it into marketing programs."
By monitoring conversations, and understanding who is interacting with the most passionate customers and to what effect, advertisers can generate lists of niche blogs and websites they may not have been aware of, and integrate this data into their online advertising strategy.
Another example of maximizing the power of social media can be seen with Protuo.com, a provider of web-based career portfolio management services. Protuo was in search of the elusive "influencer" audience when it decided to leverage social media technology to help uncover blogs focusing on career and human resources issues.
By monitoring online conversations about recruiting and hiring strategies, the company was able to identify the bloggers most likely to draw an audience that would use Protuo's services. Protuo then invited key bloggers to review its offerings, which spurred discussion and ultimately increased traffic and Protuo.com registrations. During its influence campaign, overall traffic to Protuo.com has risen 27 percent. What's more, Protuo found that traffic from influential websites converted to registration 40 percent better than online leads generated from other sites.
Before you set out to identify the online influencers that are most important to your advertising strategy, make sure you and your team understand how social media requires a different plan of action.
1. Know your marketing goals: Be careful not to get roped into helming a social media marketing or advertising effort simply because it's trendy. Before embarking on these initiatives, take the time to understand what you want from your ad spend. How do you want creators and consumers of social media to respond to your ad efforts? What is their ideal experience? Clicking on a text link off of a blog post, or reading blog coverage of your company from a source they trust and traveling to your site via an embedded link? Figure out the answers to these questions before jumping into a social media advertising program.
2. Rethink the definition of marketing communications: If you use traditional media assessment formulas to plan an ad strategy in the new world of social media, you're making a big mistake. Social media is much more than another way to communicate with your target market; it's a way for your customers to trade information that helps them make better decisions, given that they've become somewhat hardened about marketing spin. These days, they prefer to take their cues from other consumers whom they trust. For a social media-based ad campaign to be successful, it needs to be based on authentic interactions at every stage of the customer lifecycle, not just when you're pushing messages out to them.
3. Find the influencers: You can't plan an online advertising strategy until you know how to reach an audience that's primed to hear your messages. You need to identify where the conversations that connect to your marketing goals are taking place, and who is shaping those conversations. Since influence in the social media world isn't always determined by audience size, this can lead to some interesting surprises. The process of finding influencers turns some conventional ideas about marketing upside down. Rather than first searching for advertising targets and then deciding where and when to advertise, the process begins by determining what's being said, and figuring out who is saying it.
4. See beyond the assumed customer base: Marketers need to recognize that influencers are not always the current customers for their company's products and services. They can be former customers who have become dissatisfied, they may be fans of your competitors, or they may simply have strong opinions about your market. The ability to see beyond your own customer base is an important skill for social media engagement.
5. Redefine what "advertising" means: It's not just about placing an ad anymore. For instance, companies like Protuo can use a social media engagement strategy to generate online leads (which is the objective of many paid search ad campaigns). As a result, the company was able to generate traffic that converted to action better than incoming leads from typical online advertising methods. Marketers don't necessarily associate "influencer marketing" with hard metrics, but the dense network of links that power social media conversations enables consumers reading their favorite blogs to quickly jump to the kind of content that will trigger a purchase.
6. Take a multi-pronged approach: In social media, traditional online ad placement isn't enough to engage your potential customers. Participation is a key step. Comment on the blogs of key influencers. Write your own posts in order to challenge them on important topics. Join in the conversation instead of waiting for the conversation to come to you.
Finally, a key piece of advice for any marketer who wants to stick a toe in the social media waters: If this is your first foray into a social media advertising effort, don't invest too much in the first campaign. Do it quickly, do it cheaply and change strategies if needed. The good news is that social media -- with its low cost of entry and speed of access -- lends itself well to this kind of marketing journey.
Advertising against social media (on blog sites or within social networks) promises far better returns than traditional online content, but many advertisers are struggling when it comes to tapping into the power of these user-generated content (UGC) networks.
Social media -- in which word-of-mouth communication reigns -- is unparalleled at building passionate networks of like-minded people, particularly in the blogosphere. Of course, the nebulous world of social media is also a thorn in advertisers' collective sides due to a variety of reasons, not the least of which is the unpredictable content it generates and the difficulty in accurately measuring its impact.
Why is social media so hard to corral and measure? One reason is that the people creating the kind of influential content that impacts consumer behavior aren't necessarily the people who claim the most eyeballs. An "influencer" may have a small audience from a numbers' standpoint but can also have a massive impact on your target customers' buying habits.
The recent Nielsen//NetRatings announcement about the new "time spent" metric underscores this issue. The industry shift away from the page view as the unrivaled metric king demonstrates that the number of hits on a website doesn't necessarily equal the most value for your advertising dollar.
Since the most influential blogs don't always have the biggest audiences, traditional online advertising models can be far off the mark when it comes to reaching the most qualified leads.
For example, an ad buy targeted to a search result is unlikely to place you in front of networks of people with a passion for the product or service you're offering. However, a blog that draws together a community of like-minded readers -- who engage in discussions and share ideas and opinions -- has the loyal audience that can significantly drive up conversion rates.
Initial research bears this out: A recent study from BlueLithium Labs compared ads on sites with UGC, and sites without such content. The ads on non-UGC sites had a 32 percent higher conversion rate; however, due to the lower cost of advertising on UGC sites, the cost-per-conversion for non-UGC sites was 58 percent higher.
Advertisers are sensing this promise. The latest research from eMarketer shows that ad spending on websites that feature UGC (like photo and video sharing) is expected to rise to $4.3 billion by 2011.
The key is for advertisers to define the kind of social media (blogs, for example) that best fits their overall brands and specific campaigns, then design an effective way to surface the content that will truly deliver from an ad perspective.
Finding the people who influence consumer behavior
Locating influencers is a tough online challenge, especially in an internet landscape characterized by traditional media, UGC, social networks and 12 million blogs in the United States alone. Popularity ranking and subjective authority evaluations of a particular website or blog fall short when you take a closer look. A blogger who is considered an authority on a given topic might hold great influence when it comes to that subject but could have less or zero influence if a new topic is introduced. Likewise, a specific web page may be "popular" but ranks very low on the influence scale on a specific topic within a certain context.
A year or so ago, online marketers were advised to listen to online conversations in order to gauge what was being said about their products. Listening will always be critical, but as social media matures as a marketing channel, zeroing in on the content to actually engage with it is becoming increasingly important for brands.
Fortunately, new technologies are making it easier to find the influencers who matter more quickly. And some marketers are finding that, when it comes to social media, simply building relationships with online opinion leaders can create marketing events that deliver measurable business impact.
Screenlife Games, a Seattle-based maker of DVD games, recently used influence-targeting technology to build awareness of the 2007 edition of its "American Idol" game, based on the TV series of the same name.
Screenlife was able to hone in on blogs most likely to attract potential buyers of the game. This was accomplished by searching for conversational phrases specific to the 2007 season, such as "Melinda is the best," that would indicate the presence of a dedicated crowd of "American Idol" fans, or fans of Screenlife games, and not just a blog that mentioned the "Idol" show once or twice.
"We're able to catch general fans of the show and focus in on specific conversations about our game," explains Tony Roscelli, Screenlife's director of consumer research. "We can find out what they like and parlay it into marketing programs."
By monitoring conversations, and understanding who is interacting with the most passionate customers and to what effect, advertisers can generate lists of niche blogs and websites they may not have been aware of, and integrate this data into their online advertising strategy.
Another example of maximizing the power of social media can be seen with Protuo.com, a provider of web-based career portfolio management services. Protuo was in search of the elusive "influencer" audience when it decided to leverage social media technology to help uncover blogs focusing on career and human resources issues.
By monitoring online conversations about recruiting and hiring strategies, the company was able to identify the bloggers most likely to draw an audience that would use Protuo's services. Protuo then invited key bloggers to review its offerings, which spurred discussion and ultimately increased traffic and Protuo.com registrations. During its influence campaign, overall traffic to Protuo.com has risen 27 percent. What's more, Protuo found that traffic from influential websites converted to registration 40 percent better than online leads generated from other sites.
Before you set out to identify the online influencers that are most important to your advertising strategy, make sure you and your team understand how social media requires a different plan of action.
1. Know your marketing goals: Be careful not to get roped into helming a social media marketing or advertising effort simply because it's trendy. Before embarking on these initiatives, take the time to understand what you want from your ad spend. How do you want creators and consumers of social media to respond to your ad efforts? What is their ideal experience? Clicking on a text link off of a blog post, or reading blog coverage of your company from a source they trust and traveling to your site via an embedded link? Figure out the answers to these questions before jumping into a social media advertising program.
2. Rethink the definition of marketing communications: If you use traditional media assessment formulas to plan an ad strategy in the new world of social media, you're making a big mistake. Social media is much more than another way to communicate with your target market; it's a way for your customers to trade information that helps them make better decisions, given that they've become somewhat hardened about marketing spin. These days, they prefer to take their cues from other consumers whom they trust. For a social media-based ad campaign to be successful, it needs to be based on authentic interactions at every stage of the customer lifecycle, not just when you're pushing messages out to them.
3. Find the influencers: You can't plan an online advertising strategy until you know how to reach an audience that's primed to hear your messages. You need to identify where the conversations that connect to your marketing goals are taking place, and who is shaping those conversations. Since influence in the social media world isn't always determined by audience size, this can lead to some interesting surprises. The process of finding influencers turns some conventional ideas about marketing upside down. Rather than first searching for advertising targets and then deciding where and when to advertise, the process begins by determining what's being said, and figuring out who is saying it.
4. See beyond the assumed customer base: Marketers need to recognize that influencers are not always the current customers for their company's products and services. They can be former customers who have become dissatisfied, they may be fans of your competitors, or they may simply have strong opinions about your market. The ability to see beyond your own customer base is an important skill for social media engagement.
5. Redefine what "advertising" means: It's not just about placing an ad anymore. For instance, companies like Protuo can use a social media engagement strategy to generate online leads (which is the objective of many paid search ad campaigns). As a result, the company was able to generate traffic that converted to action better than incoming leads from typical online advertising methods. Marketers don't necessarily associate "influencer marketing" with hard metrics, but the dense network of links that power social media conversations enables consumers reading their favorite blogs to quickly jump to the kind of content that will trigger a purchase.
6. Take a multi-pronged approach: In social media, traditional online ad placement isn't enough to engage your potential customers. Participation is a key step. Comment on the blogs of key influencers. Write your own posts in order to challenge them on important topics. Join in the conversation instead of waiting for the conversation to come to you.
Finally, a key piece of advice for any marketer who wants to stick a toe in the social media waters: If this is your first foray into a social media advertising effort, don't invest too much in the first campaign. Do it quickly, do it cheaply and change strategies if needed. The good news is that social media -- with its low cost of entry and speed of access -- lends itself well to this kind of marketing journey.
Wednesday, May 30, 2007
Why Good Design Matters!
One of the first design and advertising books that really spoke to me was Pentagram’s - Living by Design. Its basic premise was that design extended to more than graphics, architecture, advertising - but was the entire consumer/brand experience- long before people were talking about experiential marketing.
So, when I stumbled onto Pentagram’s blog - and saw this logo - I was instantly reminded of why design does make a difference.
Take a look at this elegant logo - then read their description:
Pentagram's: One Laptop Per Child
Pentagram has designed the identity and website for One Laptop per Child, the non-profit organization with the goal of providing laptop computers to all children in developing nations.
The identity is a hieroglyph, designed to be universally understood, that utilizes the icons of the OLPC laptop interface, also developed by Pentagram. The website design employs these symbols as the basis for navigation. Each icon leads to a corresponding section of information: the laptop to a section about hardware and software, the arrow to a section about participation, and so on. The site launched in English but is currently being translated into many languages.
For all the companies that don’t think they can afford to do a proper logo on start-up, just remember, you can pay now, or pay later. A well-designed brand mark can make the difference between having a corporate identity- and becoming a lifestyle brand, ala Nike, Apple, BMW, Mini etc.
And, by the way, if you aren’t familiar with the One Laptop Per Child initiative, you need to read more about it - it’s truly something that could change the world. http://www.laptop.org
So, when I stumbled onto Pentagram’s blog - and saw this logo - I was instantly reminded of why design does make a difference.
Take a look at this elegant logo - then read their description:
Pentagram's: One Laptop Per Child
Pentagram has designed the identity and website for One Laptop per Child, the non-profit organization with the goal of providing laptop computers to all children in developing nations.
The identity is a hieroglyph, designed to be universally understood, that utilizes the icons of the OLPC laptop interface, also developed by Pentagram. The website design employs these symbols as the basis for navigation. Each icon leads to a corresponding section of information: the laptop to a section about hardware and software, the arrow to a section about participation, and so on. The site launched in English but is currently being translated into many languages.
For all the companies that don’t think they can afford to do a proper logo on start-up, just remember, you can pay now, or pay later. A well-designed brand mark can make the difference between having a corporate identity- and becoming a lifestyle brand, ala Nike, Apple, BMW, Mini etc.
And, by the way, if you aren’t familiar with the One Laptop Per Child initiative, you need to read more about it - it’s truly something that could change the world. http://www.laptop.org
Monday, April 30, 2007
Shopper vs. Retail Research
Retail marketing has grown from its humble roots as a secondary function to brand marketing, to its position today as a marketing trendsetter. Stores such as Trader Joe’s, Starbucks, Target, and Whole Foods, have done an excellent job of defining their brand and driving it through everything they do. A 2005 Harris Interactive poll shows the’ corporate reputation of many retail brands rank in the top 30 of 60 leading companies. These retailers include Target (25th), Starbucks (23rd), Wal-Mart (29th), Home Depot (12th), Costco (18th) and Best Buy (30th). This puts them in the same league as brand icons such as Pepsi (17th), Apple (27th), and Nike (24th). Little wonder top brand marketers are increasingly making the leap to retail organizations.
Retail research is not just a matter of translating standard brand marketing techniques to retail brands. The differences are based on what is different about retail marketing, and they are important to understand if you are doing retail research.
What’s Different About Retail Marketing?
Retail marketing differs from brand marketing in several important ways. Here are just a few:
Store brands have more dimensions than product or even service brands such as location, merchandise selection, store design, return policies, etc. Retail marketing objectives and metrics are different (traffic and basket size vs. repeat purchase and loyalty) which translates to different research measures.
The Reputation Quotient study, developed jointly by Harris and the Reputation Institute in New York, was conducted in two parts. Between March and June, 6,977 respondents were asked to name the two companies with the best reputations and the two with the worst. The 60 companies named most often were then rated by 19,564 people in a separate survey between Aug. 30 and Sept. 26. Results were reported in the Wall Street Journal, December 2005.
Retailers often have greater access to consumer behavior data, which makes self-reported behavior information less relevant. The dynamic nature of the retail environment means that retailers have a shorter-term outlook and a greater need for timely information (how are we doing today? What will consumers want tomorrow?).
Retailers have a broader array of direct and indirect competitors. With the Internet approaching 5% of retail spending, a retail store competes not just with other stores in its vicinity, but also with the entire Internet for consumers’ shopping dollars. This makes understanding consumer motivations and decision-making more complex.
What’s Different About Retail Research?
With all these differences, it is little wonder retailers have different research objectives and needs. First, brand marketers study consumers, as defined by their relationship to a particular category and relatively finite set of brands. In contrast, retailers study shoppers, as defined by their extremely dynamic behavior relative to an often very large set of competitive stores. This explains why retail research requires larger samples and more frequent measures.
Second, while brand research is focused on product development and promotion, retailers, (who generally enjoy strong awareness and whose store locations and designs are relatively fixed), are more focused on how to drive people to their store more frequently and convert traffic to sales once they are there. This difference explains why mystery shopping, customer shop-alongs, and smart carts that observe customers while they aren’t looking are growing rapidly. It also has implications for sample design. For instance, we have learned it doesn’t make sense to do research with shoppers who are outside a reasonable driving distance from a store, 30 miles for a warehouse club, less for a grocery or convenience store.
Finally, while brand research is focused on questions of how to influence attitudes and perceptions that in turn drive loyalty, and willingness to pay a premium price, retailers are more focused on how to be perceived as the place to shop first for a variety of merchandise types and shopping occasions. This explains why retail research often focuses on issues of merchandising and selection and competitive benchmarking.
Shopper Research
Our retail market research experience has lead us to adapt traditional research tools to fit these differences. For instance, we generally recruit larger samples for quantitative research and have more stringent participation criteria for qualitative research. We stress national samples over a few cities. And to avoid lengthy questionnaires, we work with clients’ customer panels or national panels that already have extensive profile information when appropriate.
We also make extensive use of ‘hybrid’ quantitative and qualitative studies. This technique involves fielding a 5-7 minute online screening survey among a very large sample to identify consumers that exhibit the behavior of interest. This allows us to determine the incidence of this group in the larger population and assess their ‘value’ relative to other shoppers. In a second phase of research, pinpointed groups of shoppers selected on the basis of their survey responses are brought together for a real-time, online discussion. This forum is similar to a focus group, but composed of people from all over the country and with the advantages of anonymity for the respondents and reduced interviewer bias.
Multi-channel shoppers
We have used the hybrid approach successfully to study many shopping behaviors and shopper types for a major department store retailer that has a significant online business. In one study, the purchasing behavior of frequent multi-channel shoppers were compared to those of less frequent multi-channel shoppers and frequent single channel shoppers.
The study revealed that multi-channel shopping is more pervasive than was originally thought; among the retailer’s core demographic target (women 25-54, household income $75,000+) nearly two-thirds make an online purchase at least once a month and one third make two or more Internet purchases a month. We also learned that heavy Internet shoppers are twice as likely to purchase from catalogs and 60% more likely to be a heavy store shopper.
While this information was useful on its own, the real insights came from talking to heavy multi-channel shoppers. We learned they defy easy categorization, crossing all age, income, ethnic and lifestyle groups; the one unifying theme is their dedication to shopping; they are skilled, efficient bargain hunters who love to shop for the sheer ‘thrill of the hunt’. Heavy multi-channel shoppers move fluidly between online and offline shopping; the shopping process can start anywhere and end anywhere, with circulars, catalogs, store shopping and web shopping each informing and supporting the other channels.
These insights have helped our client to understand how to improve web site navigation and design, how and when to communicate online availability and the importance of reducing barriers to Internet shopping such as shipping charges.
Club Store Shoppers
Club stores have an unusually complex mix of shoppers. While anyone can shop at a club, the greatest value is for professionals and small business owners who, according to ACNielsen, account for 38% of warehouse club sales, but account for 51% of sales.
Business owners and professionals are a diverse bunch! They cut across a spectrum of business types from offices to ‘ma and pa’ retailers to schools to church and concession stand volunteers. In order to develop relevant communications for each of these audiences, an online panel to understand and profile the relationship between business type and purchases.
Unfortunately, the analysis raised as many questions as it answered. Why would oranges be among the top items purchased by medical office personnel? Why do schools purchase so little paper? Clearly more in-depth approaches were needed. Using the hybrid methodology described above, individuals were selected to participate in qualitative online group discussions based on their profile. After conducting dozens of groups, patterns began to emerge to explain what drives shopping frequency, basket size and the mix of personal and business items in the basket. These patterns suggested many ideas for more sharply targeted messages and new services.
Summary
Shopping research is fundamentally different from standard product or brand research. In many cases, panels can offer an efficient alternative to scanner data alone or traditional methods. They enable more frequent studies, among broader samples and more precise sample selection. Online focus groups can offer dispersed samples and an in-depth approach that provides insights not easily gleaned from analysis of scanner data and surveys. Hybrid designs allow the best of both worlds by putting the shopper group of interest in a larger context without trading off the insights afforded by qualitative research. In general, we’ve learned that it is important to remain flexible and not be bound by traditional brand research techniques and questions. Retail research is unique!
Retail research is not just a matter of translating standard brand marketing techniques to retail brands. The differences are based on what is different about retail marketing, and they are important to understand if you are doing retail research.
What’s Different About Retail Marketing?
Retail marketing differs from brand marketing in several important ways. Here are just a few:
Store brands have more dimensions than product or even service brands such as location, merchandise selection, store design, return policies, etc. Retail marketing objectives and metrics are different (traffic and basket size vs. repeat purchase and loyalty) which translates to different research measures.
The Reputation Quotient study, developed jointly by Harris and the Reputation Institute in New York, was conducted in two parts. Between March and June, 6,977 respondents were asked to name the two companies with the best reputations and the two with the worst. The 60 companies named most often were then rated by 19,564 people in a separate survey between Aug. 30 and Sept. 26. Results were reported in the Wall Street Journal, December 2005.
Retailers often have greater access to consumer behavior data, which makes self-reported behavior information less relevant. The dynamic nature of the retail environment means that retailers have a shorter-term outlook and a greater need for timely information (how are we doing today? What will consumers want tomorrow?).
Retailers have a broader array of direct and indirect competitors. With the Internet approaching 5% of retail spending, a retail store competes not just with other stores in its vicinity, but also with the entire Internet for consumers’ shopping dollars. This makes understanding consumer motivations and decision-making more complex.
What’s Different About Retail Research?
With all these differences, it is little wonder retailers have different research objectives and needs. First, brand marketers study consumers, as defined by their relationship to a particular category and relatively finite set of brands. In contrast, retailers study shoppers, as defined by their extremely dynamic behavior relative to an often very large set of competitive stores. This explains why retail research requires larger samples and more frequent measures.
Second, while brand research is focused on product development and promotion, retailers, (who generally enjoy strong awareness and whose store locations and designs are relatively fixed), are more focused on how to drive people to their store more frequently and convert traffic to sales once they are there. This difference explains why mystery shopping, customer shop-alongs, and smart carts that observe customers while they aren’t looking are growing rapidly. It also has implications for sample design. For instance, we have learned it doesn’t make sense to do research with shoppers who are outside a reasonable driving distance from a store, 30 miles for a warehouse club, less for a grocery or convenience store.
Finally, while brand research is focused on questions of how to influence attitudes and perceptions that in turn drive loyalty, and willingness to pay a premium price, retailers are more focused on how to be perceived as the place to shop first for a variety of merchandise types and shopping occasions. This explains why retail research often focuses on issues of merchandising and selection and competitive benchmarking.
Shopper Research
Our retail market research experience has lead us to adapt traditional research tools to fit these differences. For instance, we generally recruit larger samples for quantitative research and have more stringent participation criteria for qualitative research. We stress national samples over a few cities. And to avoid lengthy questionnaires, we work with clients’ customer panels or national panels that already have extensive profile information when appropriate.
We also make extensive use of ‘hybrid’ quantitative and qualitative studies. This technique involves fielding a 5-7 minute online screening survey among a very large sample to identify consumers that exhibit the behavior of interest. This allows us to determine the incidence of this group in the larger population and assess their ‘value’ relative to other shoppers. In a second phase of research, pinpointed groups of shoppers selected on the basis of their survey responses are brought together for a real-time, online discussion. This forum is similar to a focus group, but composed of people from all over the country and with the advantages of anonymity for the respondents and reduced interviewer bias.
Multi-channel shoppers
We have used the hybrid approach successfully to study many shopping behaviors and shopper types for a major department store retailer that has a significant online business. In one study, the purchasing behavior of frequent multi-channel shoppers were compared to those of less frequent multi-channel shoppers and frequent single channel shoppers.
The study revealed that multi-channel shopping is more pervasive than was originally thought; among the retailer’s core demographic target (women 25-54, household income $75,000+) nearly two-thirds make an online purchase at least once a month and one third make two or more Internet purchases a month. We also learned that heavy Internet shoppers are twice as likely to purchase from catalogs and 60% more likely to be a heavy store shopper.
While this information was useful on its own, the real insights came from talking to heavy multi-channel shoppers. We learned they defy easy categorization, crossing all age, income, ethnic and lifestyle groups; the one unifying theme is their dedication to shopping; they are skilled, efficient bargain hunters who love to shop for the sheer ‘thrill of the hunt’. Heavy multi-channel shoppers move fluidly between online and offline shopping; the shopping process can start anywhere and end anywhere, with circulars, catalogs, store shopping and web shopping each informing and supporting the other channels.
These insights have helped our client to understand how to improve web site navigation and design, how and when to communicate online availability and the importance of reducing barriers to Internet shopping such as shipping charges.
Club Store Shoppers
Club stores have an unusually complex mix of shoppers. While anyone can shop at a club, the greatest value is for professionals and small business owners who, according to ACNielsen, account for 38% of warehouse club sales, but account for 51% of sales.
Business owners and professionals are a diverse bunch! They cut across a spectrum of business types from offices to ‘ma and pa’ retailers to schools to church and concession stand volunteers. In order to develop relevant communications for each of these audiences, an online panel to understand and profile the relationship between business type and purchases.
Unfortunately, the analysis raised as many questions as it answered. Why would oranges be among the top items purchased by medical office personnel? Why do schools purchase so little paper? Clearly more in-depth approaches were needed. Using the hybrid methodology described above, individuals were selected to participate in qualitative online group discussions based on their profile. After conducting dozens of groups, patterns began to emerge to explain what drives shopping frequency, basket size and the mix of personal and business items in the basket. These patterns suggested many ideas for more sharply targeted messages and new services.
Summary
Shopping research is fundamentally different from standard product or brand research. In many cases, panels can offer an efficient alternative to scanner data alone or traditional methods. They enable more frequent studies, among broader samples and more precise sample selection. Online focus groups can offer dispersed samples and an in-depth approach that provides insights not easily gleaned from analysis of scanner data and surveys. Hybrid designs allow the best of both worlds by putting the shopper group of interest in a larger context without trading off the insights afforded by qualitative research. In general, we’ve learned that it is important to remain flexible and not be bound by traditional brand research techniques and questions. Retail research is unique!
Friday, April 20, 2007
Answers To The Top Ten Questions We have Been Asked On ROI…
Survey after survey has shown that Marketing ROI is at the top of everyone’s list of the most important issues facing marketers today. In this paper, we explore why ROI is so topical and what marketers need to know about measuring the financial impact of marketing.
1. Why is Marketing ROI such a hot topic right now? Is ROI just another fad or a step in marketing’s evolution as a discipline?
ROMI is hot right now because marketing itself is hot. Companies that have ridden the cost cutting train to the end of the line, have no other strategy to turn to other than improving revenue. Marketing is the only function capable of improving the top line. This usually means more marketing spending. Since marketing is already the single largest expense for most companies, simply adding more marketing cost without showing how it translates into bottom line improvements is unrealistic. It also puts marketing at a disadvantage to other functions that can make those translations.
Even absent the pressure to increase spending, it is becoming more critical to improve the performance of existing marketing investments. “Softer Investments” such as advertising, PR, events and sponsorships that traditionally have proven more resistant to rigorous measurement, are particularly under pressure to prove their efficiency and effectiveness. Media costs have grown at nearly four times the rate of inflation during the last 10 years. CRM, Direct mail, and interactive marketing are all growing, largely at the expense of traditional media approaches due to a perception that they are more cost effective and accountable for bottom line results.
Traditional media formats are, naturally, fighting back by finding ways to put less accountable marketing efforts on a par with those that are more accountable such as direct marketing and interactive. The ARF, ANA and AAAA all have Marketing ROI at the top or near the top of their agendas of issues.
An additional sign that marketers are under pressure to demonstrate ROI is the increasing churn experienced at the CMO level. A recent Spencer Stuart study average tenure for CMOs at the top 100 branded companies in North America is just 23.6 months. Compare this to CEOs, who are in their positions, on average, for 50.6 months. Based on our data, only 14 percent of CMOs for the world’s top brands have been with their companies for more than three years — and nearly half are new to the job over the last 12 months.
April 20, 2007 (AdAge.com) -- Marc LeFar, who shepherded the $1 billion-plus marketing budget of the former Cingular Wireless for the past four years, has resigned from AT&T.
It is a safe bet that these pressures are not going to diminish in the foreseeable future; consequently, the desire to adopt rigorous ROMI methodologies is not likely to be just a fad, but rather a genuine shift in the evolution and practice of marketing. In fact, a recent study sponsored by the ANA where 70% of 222 marketing executives said, “ROI represents a long-term change in how they do business’.
2. Why has it proven so difficult to measure marketing ROI? What makes it different from other disciplines like quality, cycle time, supply chain management or R&D?
Unlike investments in quality, distribution efficiency, improved cycle time, etc. that have direct links to the bottom line, the relationship between marketing investments and financial performance is more elusive. First, there are many factors that influence sales revenue and profitability, many of which have little to do with marketing. Even when it is clear that marketing is that variable that has made the difference, that knowledge alone is nearly useless without an understanding of what worked and what to do differently. Unless the contribution of each part of the marketing effort can be related to the overall impact, it is difficult to make adjustments.
A further complication is that Marketing’s impact tends to lag the investment. For example, the impact of advertising, PR and loyalty programs are expected to be evident over time as well as in the short-term. This is especially true of long purchase cycle categories such as durables and high technology. Because this lag is not well understood, marketing continues to be considered an “expense” for accounting purposes, despite common sense and evidence to the contrary. (An MSI study using cross sectional time series regression analysis over 8 years for 2,552 firms showed that advertising acts as an asset by contributing to a firm’s financial performance for up to three years.)
A final complication lies in the difficulty of applying learning about the impact of marketing on results to predict the financial impact of future marketing investments. Unlike other investments that tend to have finite price tags, marketing investments are infinitely scalable. It is far easier to calculate the return on investment for a piece of machinery, an R&D project, and a new distribution channel where the costs are relatively fixed. In contrast, the same marketing program can cost $1.0 million or $10.0 million or $100.0 million depending on how aggressively it is pursued. The ROI at each of these levels and all the points in between would need to be calculated, a much more complex undertaking.
In a recent Reveries survey of more than 200 marketing executives, 19% said that the financial services category is the most difficult to measure, followed by entertainment (18%), packaged goods (14%), pharmaceuticals and apparel (9% each) and consumer electronics. In other words, all of them!
3. Given these problems, is it even possible to prove the benefit of brand building activities through financial analysis?
If it’s not, there isn’t much of a future for brand building activities! The purpose of marketing is to create competitive advantage by creating value in the mind of the customer. For most companies, this can and has been measured through market share, operating margins and sales as well as more direct customer-based measures of “brand equity”. If they know what was spent to create that advantage, then in theory a return can be calculated, at least at a relatively high level.
Fortunately marketing’s value is not the issue. The purpose of ROI analysis is less about proving whether brand building activities are worthwhile and more about ensuring that marketing investments are being made as prudently as possible to maximize customer loyalty and profitability. The difficulty is that at least so far no one has found the magic bullet for relating changes in brand equity to changes in revenue for the brand.
For many companies, Lord Leverhulme’s lament “Half the money I spend on advertising wasted. The trouble is I don’t know which half” is as true today as it was in 100 years ago, but not for lack of trying. The problem has been lack of clarity around what constitutes marketing’s impact. With no real consensus on this point, each company has had decide for itself what are the relevant outcomes, proxies and hard measures.
Tim Ambler, in his book “Marketing and the Bottom Line” demonstrated that even within companies there is often a contradiction between what is measured and what is considered important to measure.
Indeed, until recently, it wasn’t thought that there could even be universal standards that worked across companies. Leading brand strategy and IMC thinkers such as David Aaker, Kevin Keller and Don Schultz have all advocated unique approaches to measuring brand equity tailored to each company’s needs. Individual ad agencies have contributed to the fray by advocating their own proprietary solutions and approaches such as Y&R’s Brand Asset Valuator.
Another significant obstacle is that marketing budget recommendations and allocation decisions are often driven by marcom managers who have not traditionally been expected to have rigorous financial or statistical training. These managers also tend to be less well-versed in strategic processes that have permeated other areas of the organization such as Six Sigma, Strategy Maps, Balanced Scorecards and the like. So while concepts of net present value, risk hurdle rates and ROI have always been available to marketers, few have had the skills or patience to adapt them for marketing. This too, is changing.
4. What are the emerging industry standards for measurement of ROI? Are we beginning to see agreement?
The dialog around ROI has only begun to solidify into a body of knowledge in the past two to three years. A handful of marketers such as working at the most sophisticated marketing companies such as James Lenskold, Guy Powell and Tim Ambler have led the way in putting forward what may eventually become a common understanding for discussing the purposes of marketing and the language of ROMI in the same way that Kaplan & Norton’s Balanced Scorecard has provided a common language for strategic planning.
While there are differences between what these thought leaders are saying, there are several principles upon which they all agree. For starters, they agree that ROMI should be approached using the same formula as ROI for other investments, namely,
ROI = (Gross Margin – Marketing Investment)/ Marketing Investment.
Guy Powell in his book, “Return on Marketing Investment”, defines ROMI as “the revenue (or margin) generated by a marketing program divided by the cost of that program at a given risk level. If a relatively low risk-marketing program costs $1M and generates $5M in new revenue, that program has a ROMI of 5.0.
Other points of agreement beyond this basic definition include:
• Gross margin should be discounted to reflect the NPV of the profit.
• Gross margin should reflect only the incremental profit associated with the program.
• ROMI projections should be used not just after the fact but prior to making investment decisions. This also requires factoring in a “threshold” or hurdle rate to reflect the risk associated with the investment.
• ROI measures should be applied both at the individual program level and at more aggregated levels.
Beyond these basics, it gets complicated very quickly. Decisions must be made about what is included and not included in the gross margin, how to measure incremental profit (immediate profit? customer lifetime value?), what cash discount factors to apply, how to allocate expenses, and more. Most of the answers to these questions will vary by company.
Then there is the whole issue of the reliability of future projections of profits. Unless a company has accurate historical data from modeling or controlled experimentation, knowing the likely impact of a program on customer acquisition, retention, sales and profits can be a real sticking point to development of a comprehensive ROI driven approach to making marketing decisions
5. Given its complexity, how many companies are really committed to full implementation of state of the art concepts of ROI?
We are still in the very earliest stages of ROI measurement and practice. The most basic ROMI approaches start at a more ad hoc program level and advance to a fully integrated picture of how various marketing programs and activities work together to influence profitability. Most companies are just starting to get a grip on it. In a recent Reveries study (2003), 72% of the 200 marketing executives surveyed indicated that they lack the necessary data to assess the return on their marketing investments. Sixteen percent said that they rely on sales data alone, while another 22% said they use some form of research such as focus groups, syndicated sales data analysis, brand awareness studies or competitive benchmarking.
A handful of companies are operating at the highest level of sophistication. Although AT&T, P&G, Kraft, Nestle, J&J and others claim to have made extraordinary strides in understanding the financial impact of their marketing programs. According to an Ad Age article, P&G changed how it spent more than one tenth of its $4.3 billion global marketing budget based on marketing mix modeling. Yet even these corporate pioneers believe there is still more work ahead.
An excellent article by Patrick LaPointe at www.marketingnpv.com called The Ladder of Insights suggests that there are five levels, beginning with sales tracking, test markets and market research (1), progressing to program level ROI (2) and resource allocation optimization (3). As the previous quote suggests, quite a few companies have made progress to level 3. At this level, application is focused on getting the mix right, determining how much of the budget should be allocated to ethnic programs vs. more mainstream marketing, interactive and direct mail vs. “softer” marketing approaches designed to build emotional bridges to customers.
Marketing mix modeling and optimization are becoming more widespread at both agencies and clients. For instance, Mullen, an Interpublic Agency in Massachusetts has developed a proprietary tool for predicting the individual and combined impact of various traditional and nontraditional media mix alternatives.
Beyond this point, the air gets a bit rarer. While the first three levels are still somewhat “granular” in that the goal is to evaluate the relative ROI performance of different marketing elements. In contrast, Levels 4 and 5 are more focused on the Total ROI efficiency of the marketing budget as a whole.
Level 4 is characterized by “a consistent approach that provides reliable correlations between market metrics and financial value” with careful attention to the reliability of those projections and consequent risk-adjustments when assessing past and potential projects. Level 5 goes even beyond this high standard by planning and measuring all marketing activities in an integrated framework that incorporates short run and long term return. This approach links into other corporate strategy effectiveness metrics such as the Balanced Scorecard or the more financially driven Economic Value Added measures (EVA). At this level, management compensation is tied to the delivery of goals.
6. What kind of data, personnel, software and skills are required to implement a comprehensive ROI driven approach to improving marketing efficiency? What is the “ROI” on that kind of investment?
Even this preliminary and basic discussion should make clear that development of ROI measures is not something that can be developed lightly or in one’s spare time. It requires substantial commitment to data gathering and analysis. Most practitioners of sophisticated ROMI business practices employ consultants or internal staff familiar with modeling techniques and finance. Unless a company has extensive data gathering and analytics capability, getting started will require a substantial upfront investment and some new skill sets. It requires top management commitment, and a long horizon.
The data suggests that the results are well-worth the effort.
• In his book, The Loyalty Effect, Frederick Reichheld famously sparked the growth of the entire CRM industry with the observation that “companies can boost profits by almost 100% by retaining just 5% more of their customers”.
• The American Productivity and Quality Center (APQC) in conjunction with the ARF published a best practices report, Maximizing Marketing ROI, which showed that companies gain a competitive advantage and increased profitability through the application of marketing ROI measurements and modeling.
• As noted above, P&G used marketing mix modeling last year to change how it spent more than 10% of its reported global outlay.
• Clorox used marketing mix modeling to justify shifting funds from advertising to promotion for Kingsford charcoal and Clorox bleach, moves that reportedly saved Clorox an estimated $65 million on wasteful trade promotions.
Aside from quantifiable results, having a language, a process and scorecard of metrics for managing ROMI can have a strong pay off in elevating the dialog and aligning decisions about what investments will have the greatest impact on revenue and financial performance over time. Using an ROI based approach to marketing decisions can help bridge the disconnect that often exists between marketer and other business professionals. While marketing professionals have tended to speak in terms of brand equity, impressions, clicks, GRP’S and CPM’s, everyone can now share a language of revenue, customer employee loyalty, shareholder value and profitability.
More important, solid metrics and processes allow businesses to confidently make fact based decisions on what are the right levels of investment and how those investments should be allocated across marketing programs to achieve their objectives. After all it has been famously observed, “what is measured is managed”. With ROI based approaches to marketing, the focus is on measuring and managing what is strategically important to the company.
7. How do I determine what are the right measures and approach for my company? Where should I concentrate, at the campaign, customer or corporate level?
The first step is to determine the appropriate unit to measure. In the past this was defined as the “product brand”, but increasingly, this has become the company because few “products” are marketed as stand alone brands anymore. In fact, it can be argued that today, all brands are “service brands” because the economies endorser brands have led to families of products and services all built upon a common brand experience platform.
The second step is to categorize measures according to the degree to which they are describe marketing activity, an impact or an end result of marketing. This is not always easy, as some end results contribute to higher levels of results. For example, is brand awareness a contributor or a result of marketing effectiveness?
In fact there are roughly 3 tiers of activity, activities, impacts and value. James Lenskold describes the hierarchy this way, (from James Lenskold, Marketing ROI: Playing to Win,” Marketing Management, Vol II, Number 3, May/June 2002)
While this model is especially useful in thinking about the lower tiers, it may not go far enough in elaborating the value of marketing at the top levels. The focus on profitability is important but should not be used exclusively. Also important are such measures as the impact the value of the corporate franchise, stock market performance and other more “latent” brand strength indicators.
8. What types of analyses are required to understand the relationships between different metrics?
Just gathering the information is a worthwhile first step, but the data is most useful when relationships between the tiers can be identified and even quantified. This step will require development of models or even controlled experiments.
Marketing mix analytics is use for for relating marketing activities to impact. These analytic techniques have been around for decades, but their use has only recently become more widespread. According to Ad Age (3/29/04), P&G used marketing mix modeling last year to change how it spent more than $00 million of its marketing budget or nearly a tenth of its $4.3 Billion reported global outlaw. Clorox this year used modeling to justify shifting millions from advertising to promotion. Controlled market experimentation has also gained more of a foothold with the advent of new tools and technologies for micromarketing and in-store experimentation.
Likewise the relationship between marketing programs and customer equity can also be explored over time through modeling. CVA measurement, longitudinal tracking other measures can be related to consumer satisfaction and loyalty. The key to the success of these efforts is to use the attitudinal data to predict changes in behavior rather than simply treat them as ends in themselves.
Lastly, the relationship between the cumulative impact of marketing programs over time and franchise value has been successfully explored by such brand valuation techniques as Y&R’s BAM, Interbrands Brand Valuator, CoreBrand’s and Equitrends.
Note that as one moves up the hierarchy, the time frame for understanding the relationships between levels lengthens. The time frame for understanding causality between elements of a marketing program and its overall impact may be as short as a few months while that of understanding the relationship between customer equity and franchise value may require the perspective of several years or even decades. It is important to understand the relevant time frames for estimating impacts as many programs can be expected to have lagged effects.
In developing measures, it is important to recognize that it is better to have a few meaningful measures than a lot of less meaningful ones. Proliferation of new measures rarely leads to better insights. Kaplan and Norton, note that companies rarely suffer by having too few measures; more commonly they keep adding measures whenever an employee or a consultant makes a worthwhile suggestion.
In getting started, focus on a few of what are believed to be some of the main marketing drivers of your business that you have ready data to measure. These may be sales staffing, conversion rates, customer service indices, or communications measures such as web site hits. Make a distinction between what are the inputs or predictors and the outcomes. Over time, track the relationships between these factors. To determine the relationships between them. Then use those relationships to drive future programs.
We have a deep commitment to a brand strategy and an integrated approach to marketing communications. What is the relation between brand strategy and ROI? Brand strategy is an expression of how the company will create value for the customers. Brand strategies manifest themselves in product innovations, graphic design, store layout, customer service policies, and many other components of the “brand experience”. By aligning customer-facing activity around this idea, a company can prioritize its efforts and make more effective decisions across all of its business functions, including but not limited to marketing.
By definition, having a brand strategy in place is fundamental to realizing marketing ROI. However, a brand strategy does not necessarily imply specific measures or programs. Its efficacy can only be inferred by the efficacy of its implementation across a variety of programs and efforts.
Integrated Marketing Communications is the way that companies coordinate the communications aspects of a brand strategy for greater efficiency. IMC is also a strategy, an idea around which decisions can be prioritized and aligned. A plan for an IMC program outlines the specific methods by which this idea or strategy will be implemented. Once specific plans are articulated, it is appropriate and even imperative to develop corresponding metrics for measuring their impact, at the activity level if possible, and certainly at the program level.
Unfortunately, the concept of ROI has become intertwined with IMC to such an extent that it is difficult to separate the two the extent that discussing the ROI of IMC has become nearly synonymous with discussing ROMI. In fact, the responsibility for measuring ROI should be separate from IMC, and considered from the brand level.
9. Who should be responsible for making Marketing more accountable within the organization? Is there an optimal organizational structure?
As with most strategic initiatives, support for building and sustaining the culture of “analysis” required to implement a comprehensive ROI program starts at the top. At the beginning, immediate responsibility for gathering and analyzing the numbers should start with a specially designated person or committee within the Marketing department itself. Over time responsibility should extend beyond marketing to include business managers in other customer facing functions such as customer service, IT and sales. The more participation from Finance, the more likely that the system will be embraced and have an impact on strategic business decision-making.
10.What is the relationship of ROI to the Balanced Scorecard or other corporate strategy planning tools?
Integrating ROI measures with other Balanced Scorecard measures is essential to ensuring that marketing is aligned with other functions in furthering corporate goals. The Balanced Scorecard with its emphasis on financial as well as non-financial measures, ensures that a broad measurement system is put in place that ties directly to corporate strategy.
If a company already has a balanced scorecard or other planning system in place, including ROI measures is not difficult to accomplish. If not, the implementation of an ROMI measurement system affords an ideal opportunity to articulate corporate goals in terms of key metrics.
1. Why is Marketing ROI such a hot topic right now? Is ROI just another fad or a step in marketing’s evolution as a discipline?
ROMI is hot right now because marketing itself is hot. Companies that have ridden the cost cutting train to the end of the line, have no other strategy to turn to other than improving revenue. Marketing is the only function capable of improving the top line. This usually means more marketing spending. Since marketing is already the single largest expense for most companies, simply adding more marketing cost without showing how it translates into bottom line improvements is unrealistic. It also puts marketing at a disadvantage to other functions that can make those translations.
Even absent the pressure to increase spending, it is becoming more critical to improve the performance of existing marketing investments. “Softer Investments” such as advertising, PR, events and sponsorships that traditionally have proven more resistant to rigorous measurement, are particularly under pressure to prove their efficiency and effectiveness. Media costs have grown at nearly four times the rate of inflation during the last 10 years. CRM, Direct mail, and interactive marketing are all growing, largely at the expense of traditional media approaches due to a perception that they are more cost effective and accountable for bottom line results.
Traditional media formats are, naturally, fighting back by finding ways to put less accountable marketing efforts on a par with those that are more accountable such as direct marketing and interactive. The ARF, ANA and AAAA all have Marketing ROI at the top or near the top of their agendas of issues.
An additional sign that marketers are under pressure to demonstrate ROI is the increasing churn experienced at the CMO level. A recent Spencer Stuart study average tenure for CMOs at the top 100 branded companies in North America is just 23.6 months. Compare this to CEOs, who are in their positions, on average, for 50.6 months. Based on our data, only 14 percent of CMOs for the world’s top brands have been with their companies for more than three years — and nearly half are new to the job over the last 12 months.
April 20, 2007 (AdAge.com) -- Marc LeFar, who shepherded the $1 billion-plus marketing budget of the former Cingular Wireless for the past four years, has resigned from AT&T.
It is a safe bet that these pressures are not going to diminish in the foreseeable future; consequently, the desire to adopt rigorous ROMI methodologies is not likely to be just a fad, but rather a genuine shift in the evolution and practice of marketing. In fact, a recent study sponsored by the ANA where 70% of 222 marketing executives said, “ROI represents a long-term change in how they do business’.
2. Why has it proven so difficult to measure marketing ROI? What makes it different from other disciplines like quality, cycle time, supply chain management or R&D?
Unlike investments in quality, distribution efficiency, improved cycle time, etc. that have direct links to the bottom line, the relationship between marketing investments and financial performance is more elusive. First, there are many factors that influence sales revenue and profitability, many of which have little to do with marketing. Even when it is clear that marketing is that variable that has made the difference, that knowledge alone is nearly useless without an understanding of what worked and what to do differently. Unless the contribution of each part of the marketing effort can be related to the overall impact, it is difficult to make adjustments.
A further complication is that Marketing’s impact tends to lag the investment. For example, the impact of advertising, PR and loyalty programs are expected to be evident over time as well as in the short-term. This is especially true of long purchase cycle categories such as durables and high technology. Because this lag is not well understood, marketing continues to be considered an “expense” for accounting purposes, despite common sense and evidence to the contrary. (An MSI study using cross sectional time series regression analysis over 8 years for 2,552 firms showed that advertising acts as an asset by contributing to a firm’s financial performance for up to three years.)
A final complication lies in the difficulty of applying learning about the impact of marketing on results to predict the financial impact of future marketing investments. Unlike other investments that tend to have finite price tags, marketing investments are infinitely scalable. It is far easier to calculate the return on investment for a piece of machinery, an R&D project, and a new distribution channel where the costs are relatively fixed. In contrast, the same marketing program can cost $1.0 million or $10.0 million or $100.0 million depending on how aggressively it is pursued. The ROI at each of these levels and all the points in between would need to be calculated, a much more complex undertaking.
In a recent Reveries survey of more than 200 marketing executives, 19% said that the financial services category is the most difficult to measure, followed by entertainment (18%), packaged goods (14%), pharmaceuticals and apparel (9% each) and consumer electronics. In other words, all of them!
3. Given these problems, is it even possible to prove the benefit of brand building activities through financial analysis?
If it’s not, there isn’t much of a future for brand building activities! The purpose of marketing is to create competitive advantage by creating value in the mind of the customer. For most companies, this can and has been measured through market share, operating margins and sales as well as more direct customer-based measures of “brand equity”. If they know what was spent to create that advantage, then in theory a return can be calculated, at least at a relatively high level.
Fortunately marketing’s value is not the issue. The purpose of ROI analysis is less about proving whether brand building activities are worthwhile and more about ensuring that marketing investments are being made as prudently as possible to maximize customer loyalty and profitability. The difficulty is that at least so far no one has found the magic bullet for relating changes in brand equity to changes in revenue for the brand.
For many companies, Lord Leverhulme’s lament “Half the money I spend on advertising wasted. The trouble is I don’t know which half” is as true today as it was in 100 years ago, but not for lack of trying. The problem has been lack of clarity around what constitutes marketing’s impact. With no real consensus on this point, each company has had decide for itself what are the relevant outcomes, proxies and hard measures.
Tim Ambler, in his book “Marketing and the Bottom Line” demonstrated that even within companies there is often a contradiction between what is measured and what is considered important to measure.
Indeed, until recently, it wasn’t thought that there could even be universal standards that worked across companies. Leading brand strategy and IMC thinkers such as David Aaker, Kevin Keller and Don Schultz have all advocated unique approaches to measuring brand equity tailored to each company’s needs. Individual ad agencies have contributed to the fray by advocating their own proprietary solutions and approaches such as Y&R’s Brand Asset Valuator.
Another significant obstacle is that marketing budget recommendations and allocation decisions are often driven by marcom managers who have not traditionally been expected to have rigorous financial or statistical training. These managers also tend to be less well-versed in strategic processes that have permeated other areas of the organization such as Six Sigma, Strategy Maps, Balanced Scorecards and the like. So while concepts of net present value, risk hurdle rates and ROI have always been available to marketers, few have had the skills or patience to adapt them for marketing. This too, is changing.
4. What are the emerging industry standards for measurement of ROI? Are we beginning to see agreement?
The dialog around ROI has only begun to solidify into a body of knowledge in the past two to three years. A handful of marketers such as working at the most sophisticated marketing companies such as James Lenskold, Guy Powell and Tim Ambler have led the way in putting forward what may eventually become a common understanding for discussing the purposes of marketing and the language of ROMI in the same way that Kaplan & Norton’s Balanced Scorecard has provided a common language for strategic planning.
While there are differences between what these thought leaders are saying, there are several principles upon which they all agree. For starters, they agree that ROMI should be approached using the same formula as ROI for other investments, namely,
ROI = (Gross Margin – Marketing Investment)/ Marketing Investment.
Guy Powell in his book, “Return on Marketing Investment”, defines ROMI as “the revenue (or margin) generated by a marketing program divided by the cost of that program at a given risk level. If a relatively low risk-marketing program costs $1M and generates $5M in new revenue, that program has a ROMI of 5.0.
Other points of agreement beyond this basic definition include:
• Gross margin should be discounted to reflect the NPV of the profit.
• Gross margin should reflect only the incremental profit associated with the program.
• ROMI projections should be used not just after the fact but prior to making investment decisions. This also requires factoring in a “threshold” or hurdle rate to reflect the risk associated with the investment.
• ROI measures should be applied both at the individual program level and at more aggregated levels.
Beyond these basics, it gets complicated very quickly. Decisions must be made about what is included and not included in the gross margin, how to measure incremental profit (immediate profit? customer lifetime value?), what cash discount factors to apply, how to allocate expenses, and more. Most of the answers to these questions will vary by company.
Then there is the whole issue of the reliability of future projections of profits. Unless a company has accurate historical data from modeling or controlled experimentation, knowing the likely impact of a program on customer acquisition, retention, sales and profits can be a real sticking point to development of a comprehensive ROI driven approach to making marketing decisions
5. Given its complexity, how many companies are really committed to full implementation of state of the art concepts of ROI?
We are still in the very earliest stages of ROI measurement and practice. The most basic ROMI approaches start at a more ad hoc program level and advance to a fully integrated picture of how various marketing programs and activities work together to influence profitability. Most companies are just starting to get a grip on it. In a recent Reveries study (2003), 72% of the 200 marketing executives surveyed indicated that they lack the necessary data to assess the return on their marketing investments. Sixteen percent said that they rely on sales data alone, while another 22% said they use some form of research such as focus groups, syndicated sales data analysis, brand awareness studies or competitive benchmarking.
A handful of companies are operating at the highest level of sophistication. Although AT&T, P&G, Kraft, Nestle, J&J and others claim to have made extraordinary strides in understanding the financial impact of their marketing programs. According to an Ad Age article, P&G changed how it spent more than one tenth of its $4.3 billion global marketing budget based on marketing mix modeling. Yet even these corporate pioneers believe there is still more work ahead.
An excellent article by Patrick LaPointe at www.marketingnpv.com called The Ladder of Insights suggests that there are five levels, beginning with sales tracking, test markets and market research (1), progressing to program level ROI (2) and resource allocation optimization (3). As the previous quote suggests, quite a few companies have made progress to level 3. At this level, application is focused on getting the mix right, determining how much of the budget should be allocated to ethnic programs vs. more mainstream marketing, interactive and direct mail vs. “softer” marketing approaches designed to build emotional bridges to customers.
Marketing mix modeling and optimization are becoming more widespread at both agencies and clients. For instance, Mullen, an Interpublic Agency in Massachusetts has developed a proprietary tool for predicting the individual and combined impact of various traditional and nontraditional media mix alternatives.
Beyond this point, the air gets a bit rarer. While the first three levels are still somewhat “granular” in that the goal is to evaluate the relative ROI performance of different marketing elements. In contrast, Levels 4 and 5 are more focused on the Total ROI efficiency of the marketing budget as a whole.
Level 4 is characterized by “a consistent approach that provides reliable correlations between market metrics and financial value” with careful attention to the reliability of those projections and consequent risk-adjustments when assessing past and potential projects. Level 5 goes even beyond this high standard by planning and measuring all marketing activities in an integrated framework that incorporates short run and long term return. This approach links into other corporate strategy effectiveness metrics such as the Balanced Scorecard or the more financially driven Economic Value Added measures (EVA). At this level, management compensation is tied to the delivery of goals.
6. What kind of data, personnel, software and skills are required to implement a comprehensive ROI driven approach to improving marketing efficiency? What is the “ROI” on that kind of investment?
Even this preliminary and basic discussion should make clear that development of ROI measures is not something that can be developed lightly or in one’s spare time. It requires substantial commitment to data gathering and analysis. Most practitioners of sophisticated ROMI business practices employ consultants or internal staff familiar with modeling techniques and finance. Unless a company has extensive data gathering and analytics capability, getting started will require a substantial upfront investment and some new skill sets. It requires top management commitment, and a long horizon.
The data suggests that the results are well-worth the effort.
• In his book, The Loyalty Effect, Frederick Reichheld famously sparked the growth of the entire CRM industry with the observation that “companies can boost profits by almost 100% by retaining just 5% more of their customers”.
• The American Productivity and Quality Center (APQC) in conjunction with the ARF published a best practices report, Maximizing Marketing ROI, which showed that companies gain a competitive advantage and increased profitability through the application of marketing ROI measurements and modeling.
• As noted above, P&G used marketing mix modeling last year to change how it spent more than 10% of its reported global outlay.
• Clorox used marketing mix modeling to justify shifting funds from advertising to promotion for Kingsford charcoal and Clorox bleach, moves that reportedly saved Clorox an estimated $65 million on wasteful trade promotions.
Aside from quantifiable results, having a language, a process and scorecard of metrics for managing ROMI can have a strong pay off in elevating the dialog and aligning decisions about what investments will have the greatest impact on revenue and financial performance over time. Using an ROI based approach to marketing decisions can help bridge the disconnect that often exists between marketer and other business professionals. While marketing professionals have tended to speak in terms of brand equity, impressions, clicks, GRP’S and CPM’s, everyone can now share a language of revenue, customer employee loyalty, shareholder value and profitability.
More important, solid metrics and processes allow businesses to confidently make fact based decisions on what are the right levels of investment and how those investments should be allocated across marketing programs to achieve their objectives. After all it has been famously observed, “what is measured is managed”. With ROI based approaches to marketing, the focus is on measuring and managing what is strategically important to the company.
7. How do I determine what are the right measures and approach for my company? Where should I concentrate, at the campaign, customer or corporate level?
The first step is to determine the appropriate unit to measure. In the past this was defined as the “product brand”, but increasingly, this has become the company because few “products” are marketed as stand alone brands anymore. In fact, it can be argued that today, all brands are “service brands” because the economies endorser brands have led to families of products and services all built upon a common brand experience platform.
The second step is to categorize measures according to the degree to which they are describe marketing activity, an impact or an end result of marketing. This is not always easy, as some end results contribute to higher levels of results. For example, is brand awareness a contributor or a result of marketing effectiveness?
In fact there are roughly 3 tiers of activity, activities, impacts and value. James Lenskold describes the hierarchy this way, (from James Lenskold, Marketing ROI: Playing to Win,” Marketing Management, Vol II, Number 3, May/June 2002)
While this model is especially useful in thinking about the lower tiers, it may not go far enough in elaborating the value of marketing at the top levels. The focus on profitability is important but should not be used exclusively. Also important are such measures as the impact the value of the corporate franchise, stock market performance and other more “latent” brand strength indicators.
8. What types of analyses are required to understand the relationships between different metrics?
Just gathering the information is a worthwhile first step, but the data is most useful when relationships between the tiers can be identified and even quantified. This step will require development of models or even controlled experiments.
Marketing mix analytics is use for for relating marketing activities to impact. These analytic techniques have been around for decades, but their use has only recently become more widespread. According to Ad Age (3/29/04), P&G used marketing mix modeling last year to change how it spent more than $00 million of its marketing budget or nearly a tenth of its $4.3 Billion reported global outlaw. Clorox this year used modeling to justify shifting millions from advertising to promotion. Controlled market experimentation has also gained more of a foothold with the advent of new tools and technologies for micromarketing and in-store experimentation.
Likewise the relationship between marketing programs and customer equity can also be explored over time through modeling. CVA measurement, longitudinal tracking other measures can be related to consumer satisfaction and loyalty. The key to the success of these efforts is to use the attitudinal data to predict changes in behavior rather than simply treat them as ends in themselves.
Lastly, the relationship between the cumulative impact of marketing programs over time and franchise value has been successfully explored by such brand valuation techniques as Y&R’s BAM, Interbrands Brand Valuator, CoreBrand’s and Equitrends.
Note that as one moves up the hierarchy, the time frame for understanding the relationships between levels lengthens. The time frame for understanding causality between elements of a marketing program and its overall impact may be as short as a few months while that of understanding the relationship between customer equity and franchise value may require the perspective of several years or even decades. It is important to understand the relevant time frames for estimating impacts as many programs can be expected to have lagged effects.
In developing measures, it is important to recognize that it is better to have a few meaningful measures than a lot of less meaningful ones. Proliferation of new measures rarely leads to better insights. Kaplan and Norton, note that companies rarely suffer by having too few measures; more commonly they keep adding measures whenever an employee or a consultant makes a worthwhile suggestion.
In getting started, focus on a few of what are believed to be some of the main marketing drivers of your business that you have ready data to measure. These may be sales staffing, conversion rates, customer service indices, or communications measures such as web site hits. Make a distinction between what are the inputs or predictors and the outcomes. Over time, track the relationships between these factors. To determine the relationships between them. Then use those relationships to drive future programs.
We have a deep commitment to a brand strategy and an integrated approach to marketing communications. What is the relation between brand strategy and ROI? Brand strategy is an expression of how the company will create value for the customers. Brand strategies manifest themselves in product innovations, graphic design, store layout, customer service policies, and many other components of the “brand experience”. By aligning customer-facing activity around this idea, a company can prioritize its efforts and make more effective decisions across all of its business functions, including but not limited to marketing.
By definition, having a brand strategy in place is fundamental to realizing marketing ROI. However, a brand strategy does not necessarily imply specific measures or programs. Its efficacy can only be inferred by the efficacy of its implementation across a variety of programs and efforts.
Integrated Marketing Communications is the way that companies coordinate the communications aspects of a brand strategy for greater efficiency. IMC is also a strategy, an idea around which decisions can be prioritized and aligned. A plan for an IMC program outlines the specific methods by which this idea or strategy will be implemented. Once specific plans are articulated, it is appropriate and even imperative to develop corresponding metrics for measuring their impact, at the activity level if possible, and certainly at the program level.
Unfortunately, the concept of ROI has become intertwined with IMC to such an extent that it is difficult to separate the two the extent that discussing the ROI of IMC has become nearly synonymous with discussing ROMI. In fact, the responsibility for measuring ROI should be separate from IMC, and considered from the brand level.
9. Who should be responsible for making Marketing more accountable within the organization? Is there an optimal organizational structure?
As with most strategic initiatives, support for building and sustaining the culture of “analysis” required to implement a comprehensive ROI program starts at the top. At the beginning, immediate responsibility for gathering and analyzing the numbers should start with a specially designated person or committee within the Marketing department itself. Over time responsibility should extend beyond marketing to include business managers in other customer facing functions such as customer service, IT and sales. The more participation from Finance, the more likely that the system will be embraced and have an impact on strategic business decision-making.
10.What is the relationship of ROI to the Balanced Scorecard or other corporate strategy planning tools?
Integrating ROI measures with other Balanced Scorecard measures is essential to ensuring that marketing is aligned with other functions in furthering corporate goals. The Balanced Scorecard with its emphasis on financial as well as non-financial measures, ensures that a broad measurement system is put in place that ties directly to corporate strategy.
If a company already has a balanced scorecard or other planning system in place, including ROI measures is not difficult to accomplish. If not, the implementation of an ROMI measurement system affords an ideal opportunity to articulate corporate goals in terms of key metrics.
Wednesday, April 18, 2007
Word of Mouth "Viral" Marketing – Understanding Social Pillars - Moribund of Traditional Research
Word of mouth influence is older than the apostles, but the advent of the Internet has taken it to new levels. Of the 24% of adult consumers who say they ‘regularly’ make online purchases, twice as many say they ‘regularly’ seek advice from others before buying than adults who never or occasionally purchase online.
Peer-to-peer communication is most influential to consumers’ decisions across the seven product categories (Car/Truck, Electronics, Apparel/Clothing, Groceries, Medicine, Telecom and Eating Out) that were measured in nearly every age group, but it was especially true of younger people, many of whom belong to one or more social networks such as Facebook, Blackbook2, Myspace or Xanga. Research shows that 18-34 consumers are especially influenced by the opinions of their friends in the categories of ‘electronics’ and ‘eating out’. Friends or social networks for those 18-24 are even more pronounced with over 50% of purchases influence the figures.
The Viral Bandwagon:
With figures like these, it is little wonder that online and offline marketers are racing to build a marketing infrastructure and measurement systems to enable more effective word of mouth marketing campaigns. Everyone from Rupert Murdoch’s NewsCorp to Carnival Cruises is building – or buying -- a social network. According to Emarketer, 43% of marketers are planning to use a word of mouth marketing campaign within the next 6 months.
But What Do Consumers Want To Talk About?
According to Blogpulse (Nielsen Buzzmetrics), only a fraction of the online conversations concern brands and products. This raises the question, ‘how can marketers consistently give consumers the tools for initiating dialogs that influence brand standing and sales?’ Do we, as marketers really know how to translate brand strategies into ‘viral’ messages?
Traditional market research is not a lot of help in this new “Viral" world. Consider for a moment that the basic tools of market research are about as foreign to social marketing as corporate procurement is to EBay.
- Recruit random samples of strangers
- Put them in an artificial environments
- Ask them to reacte to marketer devised creative ideas or worse, ‘concept statements’
- Control the dialog with little ability to capture consumer language or emotion
- Allow little respondent interaction
Identifying "Viral" Potential:
Social marketing (influence Pillars) is about understanding what consumers find worthy of talking to others about in the environment where those conversations take place – social networks. Social Pillars include music, clothing, sports, culture, etc.
Working in partnership with an existing networks, identifying respondents by their interests and viewing conversations so you can identify which ideas have the greatest ‘viral’ potential.
It Starts With A Community:
Brands that already have an online community are natural candidates for using the Social Marketing to gain insights about how consumers interact – or would like to interact – to spread the word about the brands they love.
We have identified thousands of brand communities within its network covering a wide range of brands and topics, everything from Apple to Kraft Easy Mac to soap operas. For instance, with no marketing effort at all, 650 communities have sprung up to share experiences about Jeep alone! There are nearly 20,000 people who initiated or joined a group with the word ‘soap opera’ in the name.
There are numbers of Urban boards that have been responsible for the start of "Viral" communications for brands. Starbury Sneakers success is due to these boards. Understand - Brand (sales) success starts in Urban communities and spreads to suburban communities. Hush Puppies is another great example of the power of Urban "Trend Setters" and "Influencers".
Companies that have started a customer or consumer panel are in an especially good position to explore opportunities for viral marketing. For example, Sam’s Club has built a panel of small business members who are eager to connect with similar like-minded business people. However, any online community can provide a starting point.
Blurring The Line Between Research And Marketing:
Researchers have always known that the mere act of asking a question influences the response. Social Network Marketing takes this basic insight and leverages it to not only gain insights, but to influence the network. By studying which ideas stimulate brand conversations, marketers will be better able to consistently identify the most powerful viral ideas. Consumers want to talk about brands and products. Now marketers have a way of learning how to influence the process.
Peer-to-peer communication is most influential to consumers’ decisions across the seven product categories (Car/Truck, Electronics, Apparel/Clothing, Groceries, Medicine, Telecom and Eating Out) that were measured in nearly every age group, but it was especially true of younger people, many of whom belong to one or more social networks such as Facebook, Blackbook2, Myspace or Xanga. Research shows that 18-34 consumers are especially influenced by the opinions of their friends in the categories of ‘electronics’ and ‘eating out’. Friends or social networks for those 18-24 are even more pronounced with over 50% of purchases influence the figures.
The Viral Bandwagon:
With figures like these, it is little wonder that online and offline marketers are racing to build a marketing infrastructure and measurement systems to enable more effective word of mouth marketing campaigns. Everyone from Rupert Murdoch’s NewsCorp to Carnival Cruises is building – or buying -- a social network. According to Emarketer, 43% of marketers are planning to use a word of mouth marketing campaign within the next 6 months.
But What Do Consumers Want To Talk About?
According to Blogpulse (Nielsen Buzzmetrics), only a fraction of the online conversations concern brands and products. This raises the question, ‘how can marketers consistently give consumers the tools for initiating dialogs that influence brand standing and sales?’ Do we, as marketers really know how to translate brand strategies into ‘viral’ messages?
Traditional market research is not a lot of help in this new “Viral" world. Consider for a moment that the basic tools of market research are about as foreign to social marketing as corporate procurement is to EBay.
- Recruit random samples of strangers
- Put them in an artificial environments
- Ask them to reacte to marketer devised creative ideas or worse, ‘concept statements’
- Control the dialog with little ability to capture consumer language or emotion
- Allow little respondent interaction
Identifying "Viral" Potential:
Social marketing (influence Pillars) is about understanding what consumers find worthy of talking to others about in the environment where those conversations take place – social networks. Social Pillars include music, clothing, sports, culture, etc.
Working in partnership with an existing networks, identifying respondents by their interests and viewing conversations so you can identify which ideas have the greatest ‘viral’ potential.
It Starts With A Community:
Brands that already have an online community are natural candidates for using the Social Marketing to gain insights about how consumers interact – or would like to interact – to spread the word about the brands they love.
We have identified thousands of brand communities within its network covering a wide range of brands and topics, everything from Apple to Kraft Easy Mac to soap operas. For instance, with no marketing effort at all, 650 communities have sprung up to share experiences about Jeep alone! There are nearly 20,000 people who initiated or joined a group with the word ‘soap opera’ in the name.
There are numbers of Urban boards that have been responsible for the start of "Viral" communications for brands. Starbury Sneakers success is due to these boards. Understand - Brand (sales) success starts in Urban communities and spreads to suburban communities. Hush Puppies is another great example of the power of Urban "Trend Setters" and "Influencers".
Companies that have started a customer or consumer panel are in an especially good position to explore opportunities for viral marketing. For example, Sam’s Club has built a panel of small business members who are eager to connect with similar like-minded business people. However, any online community can provide a starting point.
Blurring The Line Between Research And Marketing:
Researchers have always known that the mere act of asking a question influences the response. Social Network Marketing takes this basic insight and leverages it to not only gain insights, but to influence the network. By studying which ideas stimulate brand conversations, marketers will be better able to consistently identify the most powerful viral ideas. Consumers want to talk about brands and products. Now marketers have a way of learning how to influence the process.
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