Advertising Response Rates by Channel

Published / by Simon Foster

Understanding response rates by media channel is a vital component of marketing and media planning. If you know the response rates, media costs and likely conversion rates of each channel you are using, you can forecast the ROI of your planned activity – before you spend any budget. This helps to de-risk your marketing activity and optimise how budgets are deployed to maximise ROI.

Unfortunately, many marketing and media channels are planned, negotiated, delivered and evaluated in silos. This means it can be difficult to get a set of comparative response rates which allow you to forecast how well any one channel may work for your business or brand. If you can’t compere them side by side it’s difficult to optimise budget distribution – particularly for customer acquisition activity.

Guide to response rates by media communication channels

With over twenty years’ experience of planning, managing and evaluating campaigns across practically all mainstream media channels, I thought it would be useful to share the metrics that I use as standard response metrics. These are given as percentage response rates of the audience seeing the ad.

Note: These are the response rates I would expect to see based on my experience. They should be used  as a guide and are not a guarantee. They are subject to the caveats listed below.

The caveats

  1. Response rates are driven by a number of factors including the product, offer, the creative treatment and the audience selection (media). Ideally, you should work to the highest possible standard in each of these four areas. Compromise on any of these factors will reduce response rates.
  2. Most channels have sub-sets of response rates depending on how the channel is being used. For example, TV ads can be “brand awareness” ads, “brand response” ads or “direct response ads”. Each of these have different levels of responsiveness. Brand awareness ads which are designed to change attitudes rather than short term behaviour will not deliver a high response rate.
  3. You must factor in the cost of media on a per audience basis. A favourite mistake of response rate observers is to look at response rates without factoring in channel costs. Here’s an example; the response rate from DRTV is about 100 times lower than the response rate from DM, but remember, DM costs around 100 times more per person than TV. In reality, both channels may produce a similar cost per response. That’s why it’s important to look at both factors when analysing and forecasting responses.
  4. Response rates aren’t everything; what generates revenue is sales so you need to factor in a conversion rate from response to sale.  As a general rule, personal channels like DM tend to convert at a higher rate than broadcast or online display. You can have a channel with a low response rate and high conversion rate performing as well in cost per sale terms as a channel with a high response rate and a low conversion rate.
  5. Marketing activity is subject to diminishing returns; response rates will fall as budgets increase.

2017 UK Marketing Predictions

Published / by Simon Foster

Always fun to gaze into the year ahead.  Here are my predictions for 2017:

  • Mobile web use will be an increasing problem for Google: Mobile is now the dominant web use platform. In 2010 over 95% of web activity was delivered via PC, now it’s half that. As of this October, mobile had the edge with 51.3% of web traffic according to Stacounter. Why? Because domestic web consumption has shifted to mobile and particularly to tablets. PCs still dominate at work, but workplace constraints mean most consumer web traffic is generated in the evenings, not daytime. In the evenings, the dominant web platform is mobile not PCs. As we move further into a mobile platformed, high-utility ‘appworld’ the need for traditional PC-based search will decline.
  • More large-scale ad fraud will be exposed: This is going to become a much bigger issue because advertisers are going to divert more resources into actually finding it.  Just as doctors screening for a specific illness find more cases, so advertisers will begin to understand the true scale of online ad fraud. The recent Methbot scandal has revealed the scale of fraud that is now possible; c. $5m per day via 6,000 fake domains
  • TV will remain strong: TV’s ability to deliver mass impact, reach huge swathes of the population and drive high volume, low cost brand search traffic make it a powerful and important communications channel for marketers. Couple this with the relatively high trust scores attached to TV advertising and the growth of dual screening and you can see why TV will remain an important part of the marketing landscape in 2017.
  • There will be a bid for ITV: This has been a long time coming. My prediction is that this will happen in 2017. It might be from Google. Hold / Buy.
  • Campaign goes online only: Campaign, the UK’s ad industry weekly, will drop its print format and go online.  Many of Campaign’s Haymarket stablemates have dropped their print version. Campaign has only been able to hold out because all ad people over 40 like to see their faces in print.
  • Brexit currency changes: As the value of the Pound has slipped against the Dollar, Euro and Chinese Yuan we will see increases in the cost of imports. With an estimated £21bn food trade gap, increases in imported food costs will present significant challenges to FMCG marketers. However, export areas like tourism and specialist manufacturing will benefit.
  • Continued decline of newspapers: Continued big problems for newspapers. Goodness me, how their fortunes have changed.  As the ad market has grown, newspapers have continued to lose share. It’s no surprise as our appetite for real-time news puts next day reading into the dark ages.
  • EUDPR: Marketers and agencies will start thinking much harder about the new European Data Production Regulations due to come into force in May 2018. Under the new EU regulations the use of non-permissioned data and other breaches will attract fines of up to 4% of global turnover.  Ouch. That’s enough to make every CEO in Silicon Valley sit up and take notice.
  • Digital backlash: Out of all this we can see the seeds of a digital backlash. It’s been a great ride since Google launched in 1997, but twenty years on, there are some very big issues in digital; huge and endemic multi-million – correction, billion – dollar ad fraud, the rise of politically damaging fake news and the fact that only 50% of digital ads are ever seen by living, breathing, humans.  All this is enough to push many a marketing director back to the drawing board. Expect to see some interesting changes in spend patterns in 2017.
  • Direct mail could benefit from a digital backlash.  Direct Mail. Thought it was dead and buried? Think again.  A digital backlash is the perfect breeding ground for the resurgence of reliable, effective, accountable and physical media. Which channel ticks all four boxes? Direct mail. Add to this the fact that most Millennials have never received direct mail and you can sense a real opportunity.

Examples of brilliant Direct Mail

Published / by Simon Foster

Been digging around for examples of outstanding direct mail. If you’re tired of running emails and banners ads, and you’re looking to make a real creative and intelligent impact, you might want to consider something like this, especially if you have a discrete high value segment and want to get seriously noticed.

yr-air-force-radio

The Australian Defence Force wanted to hire engineers. So George Patterson Y&R Melbourne developed this DIY radio kit to engage engineering students as potential recruits without instructions.  It won a D&AD Gold in 2014.

Here’s the story behind the campaign

 

 

Direct Mail Response Rates

Published / by Simon Foster

What response rates can you expect from Direct Mail?

Warm Direct Mail – mailings to your active customer file: In our experience, warm direct mail, i.e. DM sent to your customer file should deliver a response rate of between 1% and 5%. The average figure is around 3.5%.

Cold Direct Mail – DM send to prospects via a “cold” list: Response rates here are lower as the consumers you are mailing are less familiar with you and your brand. Typically 0.5% to 1.5%.

The DMA in the UK cites a response rate of 4% and claims that overall 7% of recipients will take some kind of action as a result of receiving direct mail.

The DMA in the US has produced a lot of information in its 2015 Response Rate Report and cites response rates of 3.7% for a house list and 1% for a cold prospect list.

DRTV Response Rates

Published / by Simon Foster

We’re often asked to forecast or estimate campaign response rates, especially in DRTV. Here are some guidelines for those who want them:

Set 1 – DRTV Phone Response Rates (high to low range as a percentage of total impacts)

  • DRTV Type 1 – Hard Hitters – these DRTV hard hitters, with no nonsense creative, usually on a 60 second time length can achieve between 1% and 0.05%. But please note, exceeding 0.05% is a very rare achievement in DRTV. It’s usually delivered through a combination of an extremely powerful ad, very strong product, with a great offer transmitted on a low level but highly responsive audience. It is very difficult to exceed 0.05% at scale.
  • DRTV Type 2 – Lead Generators – these DRTV ads are usually seeking subscription trials, leads, quotes etc and run on time lengths between 30 seconds and 60 seconds.  Response rates tend to be around 0.05% and 0.005%.
  • DRTV Type 3 – Brand Response – these ‘BRTV’ soft sellers produce lower responses generally in the range of 0.005% to 0.0005%

Set 2 – DRTV Web Response Rates (high-low range as a percentage of total impacts)

  • DRTV Type 1 – Hard Hitters –  these are high response rate ads will generate 2-3 times their phone response equivalents so around  2% and 0.1%
  • DRTV Type 2 – Lead Generators – web response rates to these tend to generate around 0.5% and 0.05%.
  • DRTV Type 3 – Brand Response – these BRTV soft sellers produce lower responses generally in the range of 0.05% to 0.005%

How to get the best from DRTV

Published / by Simon Foster

Many advertisers are returning to Direct Response Television (DRTV). Whilst the goal today is to maximise web response as opposed to phone response, many of the rules of traditional DRTV remain constant. Here’s a summary of how to get the best from Direct Response TV:

  1. Remember all DRTV begins with the offer. Whilst issues around DRTV performance are often seen as “creative” or “media” we need to remember that the proposition to consumers is key to DRTV success. If you are offering free Ferraris you will not need to think in terms of creative or media optimisation. The offer will work. Equally, if you are offering a poorly differentiated product or service, you will find it difficult to sell. Your problems will be exacerbated further if you are in a mature market packed with established offers.  So ask yourself the “so-what” question against every line of copy. If you wouldn’t buy it, no-one else will.
  2. Develop compelling DRTV creative. DRTV seeks behavioural change, and consumers need to be given good reasons to stop what they’re doing and do something else. You need to talk in terms of meaningful benefits. There are certain category rules that are helpful. If you’re selling a financial product don’t use jokes. For most people, talking about their hard-earned money is not a funny business. Concentrate on explaining what the product is different, what it offers that is new and why your target audience should find out more.
  3. Be careful with emotional sales messages. Most mainstream advertising seeks to build emotional connections between people and brands. For many brands this is the right approach, but if you want to sell off the screen, stick to promoting the benefits that make you different and giving good reasons to buy.
  4. Make sure the creative identifies your target audience. Everyone watches broadcast media. The trick to making DRTV work is to create a sense of identification between you and your target audience. Show people and situations that your target audience will identify with. Create the impression that your target audience belongs in the ad.
  5. Understand the economics of broadcast media. TV companies use every possible device to maximise the yield on the audience they are selling. Yield is the revenue generated by advertising over the cost of attracting that audience i.e. producing or buying the programming.  High quality peak programming is expensive to produce or buy. More people are at home available to view during peak viewing times (5pm to 11pm) so audiences are higher. So TV companies put their highest cost, highest quality programming into the times of day when most people are available to view.  Moreover, ad agencies want high reach, so there is high demand for high quality, high audience programming. All this makes peak airtime expensive both in terms of unit cost and capital cost. The premiums embedded in peak mean it sells at rates that rarely work for DRTV advertisers. But off-peak airtime is an entirely different matter….
  6. Unlock the benefits of off-peak airtime. Everybody watches off-peak TV; young, middle-age, old, affluent, less well off, single, married, students, working people and those who’re retired. People take holidays and have days off. But most importantly, the homemaker watches daytime TV and the homemaker is often the person who researches and makes financial plans.  Daytime can be ideal for reaching family decision makers. Daytime can be ideal for reaching students and it can be ideal for reaching affluent grey markets. Off-peak is the place to test your product in DRTV.
  7. Test, measure and learn. DRTV is direct response marketing and the lifeblood of direct response is quantified planning and control. Using BARB data it is possible to match minute by minute audience data with your minute by minute click traffic. This allows advertisers to build a response database which matches TV audience with web response. Each spot can be defined by a number of planning variables that can be controlled: day of week, time of day, channel, proximity to previous spot, length of spot and creative execution. All these factors can be combined and used to optimise future DRTV media buys.

I’ll second that B2B emotion

Published / by Simon Foster

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For some critics, B2B advertising is too rational and doesn’t contain enough emotion. If that’s the case in 2014, then something’s changed since McGraw Hill ran this, perhaps one of the most famous B2B ads in the 1960’s.  This ad is 100% B2B and yet it is stuffed with emotion.  It plays on fears of the unknown, making mistakes and it reinforces the need for brand trust. It makes a case for “business brands”.

So, what’s happened?  B2B advertising has been “over rationalised” as marketers and agencies have reinforced the idea that business buyers and purely rational buyers who base purchase decisons on nothing but facts and figures. We all know this isn’t true; business buyers are you and me (i.e. consumers) when we are at work. When we make a B2B purchase with someone else’s money, whether it’s a photocopier, a USB stick or a media deal with an online ad network, we need both rational and emotional reassurances that the decision we are making is a good one and will not be a let down to others.

Advertising Evaluation Techniques

Published / by Simon Foster

Techniques for tracking advertising are often discussed by both advertisers and agencies as they seek to identify and maximise the ROI effect of media budgets. Deciding on which techniques to use can raise a number of issues depending on the data and budgets available for advertising evaluation.  All are data dependent which means that if you are not collecting response or sales data you will need to. Costs for implementation can vary but should always be viewed in the context of the potential savings that can be made from subsequent optimsation. For example, if a regression model costs £25k, but can optimise a £2.5m budget to save £500k, then the £25k is money very well spent. Here is a short summary of advertising evaluation techniques.

You will  notice there is no mention of coverage or frequency here. That’s because coverage and frequency are useful media planning metrics but they are not direct measures of ROI – coverage and frequency are measures of audience delivery not sales response. Reach and frequency may be linked to sales response but in my opinion spend levels or GRP weights and diminishing returns in specific time intervals are more robust ways of understanding sales response to advertising.

What is a TVR?

Published / by Simon Foster

This is a question that many marketers don’t want to ask, especially when they are halfway through the agency’s TV presentation. The trouble is, the agency team have been talking about TVRs for about 20 minutes, the coffee’s gone cold and you daren’t chip in to ask “exactly what is a TVR?”

Put very simply a TVR is a TV Rating point and it means a given percentage of a base population watching a TV programme where that base is defined as 1) a given target audience in 2) a given TV region or area.  What’s important here is that because we are talking percentages the bases from which those percentages are taken can change, and this can mean huge differences in the volumes of audience actually seeing an ad. Let’s look at some examples of the effect of different base criteria when establishing TVRs.

If a TV spot runs across the UK TV network and delivers 1 Adult Network TVR how many people will see that spot? The base criteria here are 1 TVR, meaning 1% of a) the UK TV Network and b) the adult demographic population base. If there are 49 million adults in the UK i.e. across the whole UK TV network, then 1 Network Adult TVR is 1% of 49 million. That’s 490,000 Adults.

But we could also have 1 Adult TVR in the London ITV region; these are very different base criteria.  If there are 9.5m adults in London then 1 Adult TVR in London would be 1% of 9.5m – that’s 95,000. So we can already see that 1 Adult Network TVR equates to more than 5 times the audience volume of 1 Adult London TVR. Remember 1 TVR against one set of base criteria is not the same as 1 TVR against another set of base crieria. In other words, not all TVRs are equal.

Then we can look at different audiences. The UK media industry breaks audience down from all Adults 16+ into a number of sub-groups refined by age and socio economic group so we might have ABC1 Adults or Men aged 25-44 or ABC1 Women or Women aged 25-54. Each of these sub-groups (sometimes called “demos”) has a different size of population base.

So, for example we might look at a programme that delivers 1 ABC1 Adult Network TVR. As there are 26.7m ABC1 Adults in the UK network area then 1 ABC1 Adult Network TVR equates to 267,000 ABC1 Adults.  If there are 5.8m ABC1 Adults in London, the 1 ABC1 Adult London TVR would equate to an audience of 58,000 ABC1 Adults.

We need to remember that when we measure a sub-group, we are only measuring audience in that sub-group. So, whilst a programme may deliver 58,000 ABC1 Adults, it could still deliver 100,000 Adults in total. 100,000 Adult viewers in London would mean the programme had an Adult London TVR of 100,000 / 9.5m – that’s 1.69 Adult London TVRs.

TVRs are important because they are used to populate models which estimate the coverage and frequency effects of an advertising campaign. As TVRs build so do coverage and frequency. More on that in later posts…

Does social media drive sales?

Published / by Simon Foster

The question of sales generation is a growing problem for social media. Despite all the hype, it’s almost impossible to find any conclusive cross-category evidence that social media drives sales.  Yes, there are some isolated examples of success; Dell’s Twitter pages announces some great deals and I’m sure ASOS can whip up a bit of extra demand by tweeting Axl Rose’s US flag shorts, but the reality for most brands is that they are going to struggle to make social media deliver measurable sales.  This view might not be flavour of the month, but the four experiences of social media listed below certainly give the “no sales” view a high degree of credibility.

  1. In 2010, Pepsi undertook a massive social media initiative called The Refresh Project which was designed to give $20m to good causes. According to Bob Hoffman, the AdContrarian, it delivered over 80 million votes, almost 3.5 million Facebook likes and nearly 60,000 Twitter followers. But there was just one big problem; it didn’t drive sales – despite the funding coming from Pepsi marketing budgets. Pepsi’s sales fell in the year the project ran and the brand lost 5% market share worth about $350m. To make matters worse, if that were possible, Pepsi slipped to third in brand share behind Coke and Diet Coke.
  2. In both 2012 and 2013 IBM used data from around 800 e-commerce sites to track social media’s contribution to sales. In 2012 it arrived at a figure of 0.34%. In 2013 it didn’t publish the number, but hinted that it was even less.
  3. In September 2012, one of the world’s leading digital research companies, Forrester Research reported that “Social tactics are not meaningful sales drivers. While the hype around social networks as a driver of influence in ecommerce continues to capture the attention of online executives, the truth is that social continues to struggle and registers as a barely negligible source of sales…”
  4. In March 2013, Mark Ritson, formerly a professor at London Business School observed in Marketing Week that “….marketers are finally beginning to apply some measures to assess the ROI of their [social media] efforts. Once they do that they can do the one thing the social media mavens have counselled against: compare the value of social media with other options, apples to apples. And, in many cases, they are discovering the hullaballoo drummed up by the marketing media and various industry events is not quite all it was cracked up to be.”

I think most people in social media are well aware of this “no sales” problem. And because social media can’t deliver sales, they’ve invented a snow-storm of flaky measures designed to obscure harsh commercial realities. These measures include: ‘likes’, ‘fans’, ‘followers’, ‘shares’, ‘retweets’, ‘pins’, ‘follows’, ‘friends’, ‘influence’, ‘amplification’, ‘forwards’, ‘mentions’, ‘tags’ and ‘reactions’. In a commercial context these are nothing more than diversionary measures. They might enable some positive looking PowerPoint charts but they don’t deliver positive looking sales. These are ROI potatoes, when everyone else is comparing apples.

Amazingly, when social media campaigns fail to deliver sales, social media experts almost always suggest that it was the company management who got it wrong rather admitting to any shortcoming of social media itself. Whilst this claim blames marketers and management, it also spawns a convenient stay of execution for social media’s “gurus”; failure brings an opportunity to “learn lessons”, to “revise approaches” and to “develop new strategies”. In other words social media failure provides a new opportunity for marketers to waste even more money on social media activity.

Marketers badly need a serious reality check on social media. Social media environments aren’t much more than an online version of a public waiting room. People drop in, take a seat, look around and leave. They may leave a bit of rubbish. They may take a bit of rubbish with them. But that, I’m afraid, is pretty much the long and short of it for most brands. Don’t spend too much time in there, nothing will come of it.

If this sounds old-fashioned, I make no apologies. Advertising exists to drive sales.  To have advertising that doesn’t drive sales is like going to a dentist who doesn’t look at your teeth, or a barber who doesn’t cut your hair, or a mechanic who won’t fix your car. If what you’re doing can’t be directly or indirectly linked to generating sales, you’re wasting precious budget.

Would you give your agency this brief?

Published / by Simon Foster

 

 

 

 

 

 

 

 

 

 

 

A few aspects of this brief make it both remarkable and very interesting reading:

  1. Mick sends Andy “2 boxes of material which you can use, and the record”. In other words some pictures and the product.
  2. Mick adds “I leave it in your capable hands to do whatever you want”. Total trust. But then, not every agency copywriter or art director is Andy Warhol.
  3. Money is almost incidental.
  4. Mick warns Andy that he may be chased to deliver, but also advises him to ignore the chaser. That puts account management in their place.

I can only conclude that clients give their agencies such complex briefs because a) they don’t think their agencies really have to creative talent to deliver what’s required and b) they are convinced they are going to get something they don’t like. In other words, the brief becomes the client’s insurance policy document. Funny, that is what they often look like.

What is programmatic advertising?

Published / by Simon Foster

If you are an advertiser you may have heard the expressions “programmatic buying”, “real time bidding” and “ad exchanges”. You may be wondering what all this is and what it means for advertisers, if you are then read on…

“Programmatic” advertising, is effectively automated online media buying – often at large scale and at very high speed (faster than lightening in some cases). Advertisers use computers to participate in real-time automated auctions for digital ad space across a large number of publisher web sites.

Bidding is supported by big data analytics; predictive algorithms are used to target bids using information about web users such as location, platform, device, browser, and where available, other forms of behavioural data relating to specific but anonymous users. There is some big data science behind this, much of which has its origins in high frequency algorithmic trading in financial markets where the principles are very similar to automated online advertising. For example, information about a user is matched to a bidding rule in a minute fraction of a second – enabling a bid to be made and a relevant ad to be served by the time the page being visited by the prospect fully loads. This high speed automated decision making is not dissimilar to rule-based or algorithmic trading in financial markets.

So is programmatic advertising important? Yes; it’s important to the long-term health of digital display as a medium and it’s important to advertisers in terms of increased advertising efficiencies. Let’s look at each of these.

Firstly, automated buying is boosting the fortunes of digital display advertising by creating renewed interest in the medium. Online display has struggled to demonstrate efficiency in the face of PPC which is based on pay per click (PPC) trading. For many years display has been traded on a CPM basis, that’s simply the cost of reaching people in their thousands, with no accounting for click or sales performance. That’s why Google has commanded such as large share of digital budgets over the last decade. But programmatic buying allows advertisers to place data-driven bids to ensure campaigns deliver the most responsive target audience at the right rate. This will significantly boost the ROI delivered by digital display and make it much more competitive with PPC. This in turn should enable it to take larger share of digital advertising budgets.

For advertisers automated buying offers a real opportunity to increase ROI from digital display. This opportunity comes from three sources: ROI-based trading mechanics, better ROI based audience targeting and clear performance transparency. All this offers advertisers a chance to make digital display much more cost effective. Moreover, the increased efficiencies delivered by automated trading will make digital display more competitive against PPC. Long term, automated display buying could have the effect of diffusing spend out of PPC alone and across the two platforms – theoretically this reduction in demand could reduce bid prices in PPC.

Are there any down sides?

It remains to be seen whether automated buying – which by its nature can reduce ad revenue – will deliver consistent long-term growth to digital display. It’s also worth noting that not all media owners will sign up to ad exchanges; those who feel they can realise the value of a web site more holistically than the lowest CPC denominator may well be resistant to signing too much inventory over to automated trading platforms – leaving them to fight over the lowest value inventory.  There are also  issues around the quality of the traffic delivered through high volumes of remnant inventory – remnant inventory is by its nature ad space that can’t be sold by normal means because it’s not demanded by media buyers. Buying remnant inventory through ad exchanges can mean you are buying into some low quality sites which may not be right for your brand’s image.

Advertising and Media Planning Books

Published / by Simon Foster

Our MD Simon Foster makes his selection of must-reads for those working in advertising and communications strategy.

If you want to brush up your knowledge of advertising and media planning, here are a few books I’d recommend. If you click the link you can find the book on Amazon.

The Communications Challenge: A practical guide to media neutral planning A practical guide to communications planning. Becoming quite collectible. Even I’m in it.

The Advertised Mind: Groundbreaking Insights into How Our Brains Respond to Advertising by Du Plessis, Erik (2005) Hardcover Interesting look into how advertising works from another practitioner, Erik Du Plessis

Advertising Effectiveness: Findings from Empirical Research This is a serious tome on understanding advertising effectiveness. Not a high profile book, but actually one of the best books on advertising effectiveness you can buy from Giep Franzen.

How to Do Better Creative Work (Prentice Hall Business) I worked with Steve Harrison for a couple of years. A remarkably understated authority on developing creative work.

101 Contrarian Ideas About Advertising: The strange world of advertising in 101 delicious bite-size pieces Contrarian thinking from Bob Hoffman who revels in challenging the industry’s status quo and accepted wisdoms. And he’s often right. Practitioner.

My Life in Advertising and Scientific Advertising (Advertising Age Classics Library) As far as I know this is the only pre-war (and I mean WW2) book on advertising that is still in print. That’s probably because it was written by a copywriter who was paid by how much he sold. And he was paid a lot.

Sexy Little Numbers: How to Use the Data You Have to Increase Sales and Grow Your Business at Virtually No Cost A lot of business and marketing problems can be better understood and even solved with numbers. Not many people realise this. Maex points the way.

Disruption: Overturning Conventions and Shaking Up the Marketplace (Adweek Magazine Series) TBWA used the disruption model for new business for about 20 years, as far as I know they still do.

Ogilvy on Advertising This is still a classic from David Ogilvy and his autobiography Confessions of an Advertising Man is also a great read.

Media Planning: A Practical Guide, Third Edition (NTC Business Books) This is a great place to start with good accessible coverage of all the basics in media planning and buying.

How Brands Grow: What Marketers Don’t Know Many brands suffer from problems that are defined at the category level, but not many marketers or agency staffers understand how categories behaviours actually work. They naturally prefer to look at consumers. Byron Sharp’s How Brands Grow shows that you must look at both.

Effective Advertising: Understanding When, How, and Why Advertising Works (Marketing for a New Century) A comprehensive “meta study” of research into advertising effectiveness from Gerard Tellis.

Predatory Thinking: A Masterclass in Out-Thinking the Competition There have been mixed reviews for this selection of Dave Trott blog posts, but as far as I know non of the reviewers have achieved anything like the reputation he enjoys.

Facebook ‘likes’ don’t increase brand preference or sales

Published / by Simon Foster

Here’s an iron for the fire: “Facebook ‘likes’ do not cause increased brand preference or increased sales so marketing campaigns designed to increase the number of ‘likes’ are unlikely to increase brand preference or sales.”

I was moved to develop and explore this hypothesis after reading an article on the real cost of brand building in social media by Mark Ritson who is a professor of marketing, formerly at London Business School. Ritson is renowned for injecting some good solid critical thinking into the often sloppy logic of marketing. Ritson argues that whilst there may be apparent relationships between brand preference, share or sales and Facebook ‘likes’, the relationship between these factors is unlikely to be causal.  Causality is important. It’s about understanding the the cause of relationships between variables in order to assess their significance; just because there is a relationship between two things, it doesn’t mean that one of them causes the other. To say with certainty that one factor drives the other, causality has to be proved.  Ritson argues that causality is being overlooked or even ignored in studies that set out to consider the value of Facebook likes in relation to brand performance.

There have been a number of studies which show that the most popular brands have the highest numbers of Facebook fans. but this shouldn’t come as a surprise to any marketer with more than a handful of brain cells.  Common sense tells us that the most popular brands are likely to have the most Facebook ‘likes’ because they have higher numbers of users and advocates.  But we need to remember that these  ‘likes’ are an expression of pre-existing brand preference and not a cause of it. Moreover, when studies try to assess the financial value of a Facebook ‘like’ they find that Facebook fans spend more on a product than Facebook users who are not fans.    One study found that Facebook likers of Starbucks coffee spent more in store than non-likers.  Well that shouldn’t come as a surprise either. Those consumers who prefer certain brands are likely to spend more money on those brands – after all isn’t that the whole purpose of consumer marketing and the process of building brands?

In both cases, there is a relationship between Facebook likes and brand performance but the relationship is caused by the strengths of the brand that almost certainly existed before the impact of Facebook. The Facebook like is not the cause of brand preference but simply a reflection of it.

If we use logic to extend these observations into prediction we can say that if likes do not cause brand preferences or increased sales, then strategies and campaigns that seek to increase the number of likes will not increase brand preference or sales. However, the predictive power of logic doesn’t stop there; brand owners developing social media strategies to grow likes risk creating “false-positive” brand advocates. These false-positives are consumers who have no genuine relationship with the brand or product but simply click the like because they are incentivised to do so. Corralling opportunistic consumers into Facebook fan pages may actually skew the brand’s Facebook page and community away from genuine fans. Worse still,  subsequent eCRM activity to develop these prospects may prove to be far less fruitful than initially anticipated.

Marketers, Ritson argues, would do well to remember the factors that really did build their brand preference.  These are likely to be product quality, availability, consumption experience and visual branding. They might also bear in mind the fact that research company TNS says that 61% of Britons do not want to engage with brands via social media and suggest that much of what is being build by brands in the social media space amounts to little more than “digital waste”. I wouldn’t go that far, but I would say that brands need to tread carefully when investing in these areas.

When we plan any social media activity at Teqtonic our objective is always to add new value to a brand in some way. That invariably involves strategies that take the consumer and the brand beyond the territory of the like. If you are going to have a meaningful social media strategy you need to think in CRM terms.  Some of your brand advocates may be gathering as a segment within certain social media environments. You need to be there to recognise and respond to their statement of loyalty and preference in a relevant way.  When you do meet up with them, make sure you give them something that reflects their commitment to you. And whatever you do, don’t mix these high value customers with competition chasers who’ll move as quickly to the next brand as they did to yours.

How is multivariate data analysis used in marketing?

Published / by Simon Foster

‘Multivariate’ means ‘many variables’ and in the context of marketing it usually means analysing multiple variables from customer records to get a deeper understanding of the customer base. This increased understanding of customer behaviour permits the development of customised offers, relevant creative messaging and more accurate media targeting – particularly with techniques like email and behavioural targeting. Very strong offer targeting will significantly increase your response and sales conversion rates.  Any company that has a database of more than around 5,000 records should be using multivariate data analysis to analyse customer data and improve marketing performance.

The most common forms of multivariate analysis in marketing are cluster analysis and hierarchical analysis. Cluster analysis uses statistical techniques to allocate customers into segments based on how similar, or dissimilar, they are to each other. So for example, if you had 10,000 customers and you were clustering by income and home ownership, you would be able to define groups of customers with similar levels of income and home ownership status, or those with high income and low home ownership status, or those with low income and high home ownership status. The number of clusters generated depends on how you set up your cluster analysis and of course, what patterns actually lie within your data. You can set up your analysis to produce either a large or small number of clusters, but most marketers can’t practically service more than about fifteen clusters.

Hierarchical analysis breaks customers down into sub-sets of the whole customer base. Results of hierarchical analysis are often shown as dendograms or tree diagrams. In a tree diagram, all customers belong to the ‘root’ and segments of the customer base are called ‘nodes’, nodes are connnected to the tree by ‘branches’.  So for example, all customers can be divided into males and females. Then the males and the females can be divided by age, and then by income and then by spend. You are then able to see what proportion of the whole base is composed of customers with certain characteristics.  Here are some examples of customer segments defined using hierarchical analysis:

  1. Spend more than £250 per year and are aged 18-34 and female and do not have children
  2. Spend more than £500 per year and are aged 25-44 and male and do not have children and earn between £20,000 and £30,000 and have a mortgage
  3. Spend more than £1000 per year and are aged 35-54 and have children and have a mortgage and live in the South East

Whichever technique you use, it is likely that you will see a small number of segments account for disproportionally large amounts of sales revenue or sales potential. When you have identified these segments you can leverage what you know to develop tailored offers, messages and targeting. Over and above this you can identify customers who have the characteristics of high performance segment membership, but are not spending at the rate they could be. You can use this information to target your marketing messages to the sales prospects with the highest untapped potential.

Social Media Metrics Made Simple: Focus on Sales and Customers

Published / by Simon Foster

I am amazed that so many people spend so much time defining and discussing social media metrics. Why? Because the answers marketers (and shareholders) want are very, very simple. Marketers want only one thing from marketing budget investment. Marketers want sales – sales are key; almost everything else is a proxy for some point on the journey to the sale. Make no mistake, companies and marketers are working to deliver sales. Sales are the elixir of life for commerce. Sales drive economies of scale and increase profitability. Sales are the business. In fact, sales are business. Period.  And despite this,  the ever expanding list of social media metrics contains virtually no hard commercial measures. Here is a list of 30 popular social media metrics I am aware of as of today:

  1. Active network size
  2. Amplification rate
  3. Applause rate
  4. Bookmarks
  5. Channel views
  6. Comments
  7. Downloads / Installs
  8. Email subscribes
  9. Engagement
  10. Fans
  11. Favourites
  12. Feed subscribes (RSS)
  13. Followers
  14. Following
  15. Forwards
  16. “Influence”
  17. Klout score
  18. Likes
  19. Lists
  20. Mentions
  21. Reactions
  22. Re-Tweets
  23. Sentiment
  24. Shares
  25. Subscribes
  26. Tags
  27. Tweets
  28. Tweet Reach
  29. Tweet Velocity ( I like this one!)
  30. Wall posts

There is a big problem here. Most of these metrics have little or no commercial meaning. What for example is the value of a “Like”? A like is no more than a mouse click on a web page. It requires no effort and takes a fraction of a second to perform.  A like requires no trade in information between the user and the item being liked. Anyone can do it and it signifies virtually nothing. Even the popular ‘email address for download’ exchange has limited value; I have downloaded a number of papers from companies it’s unlikely I’ll ever do business with – even though I am sufficiently interested in the content being provided to exchange my email address for it.

It’s ironic that whilst social media commentators and practitioners are busy churning out metrics with no real commercial meaning, traditional media is moving away from proxy data like coverage and frequency and into measuring and proving commercial behavioural change (fancy talk for sales) resulting from media activity.  It seems to me that social media evaluation has slipped into reverse gear and no none has noticed.  If social media is to advance its cause it needs to show either a direct or indirect link to more commercial measures like sales and customers. Is that possible? Well yes it is and it’s relatively straightforward.

All communication and media channels including digital media feed into sales funnels. Digital media traffic is the most measurable of these and can be tracked and measured in great detail from clicks to basket values.  This means it is possible to measure the commercial value of traffic generated by social media. If your Facebook page is generating traffic you can identify it in your inbound traffic logs. And if you can track the traffic through to sales baskets you can measure the sales generated by Facebook. And then you can start looking at your social media ROI numbers. If your Facebook page is referring 1,000 sales a month with a profit of £10 per sale, and costing only £1000 per month to manage and maintain, it’s making a valuable contribution to your business. If other hand it is producing 100 sales per month with £10 profit per sale and costs £10,000 per month to manage and maintain, then you are throwing money away.

The truth is that many social media variables only exist because of a strong supply side data push. Social media metrics are easy to produce; be they likes, friends, tweets, connections or channel subscribers they’re just descriptive data. At worst these metrics are a distraction for marketers. At best they are a rough proxy that needs to be calibrated with more meaningful commercial data. What marketers and business leaders want is sales, share, customers, customer value and profit. If social media sticks with likes, friends and subscribers sooner or later it will have to show what they mean.

Is Social Media CRM’s new platform?

Published / by Simon Foster

For many years CRM has been a “direct” channel delivering one way communications to customers. Now, with the advent and maturity of social media networks brands have the opportunity to engage in more balanced and cohesive discussion with customers and consumers. Social media with its wide accessibility and easy to use functionality offers brands a platform on which to engage with consumers on their terms. This in turn offers brands a sea change opportunity in the way they manage customer relationships.

CRM has never been perfect. Traditionally, the term CRM has meant email, direct mail, SMS and phone. These are ‘push’ communication channels. Brands push their message out to their customer base. Push communications have always had a problem; they are by nature interruptive, as such they risk being seen as intrusive or irrelevant at time of receipt. This is just one of the reasons why many forms of DM based CRM are still referred to as ‘junk mail’ by consumers. Other reasons for ‘junk’ status are that these communications are often not requested, they’re irrelevant, they’re not green, and they leave your customer with the feeling that you are trying to persuade them to do something they may not want to do. In short, people like being in control. By pushing your message into your customers’ lives you threaten that control and risk being ‘junked’.

The advent of social media offers us the opportunity to overcome these issues and move towards a more perfect world in CRM. With its ability to aggregate, assemble and cluster groups of like minded individuals social media allows us to address and overcome the junk issues listed above. Social media gives brands an opportunity for a radical re-think of what CRM is, how it works and how we deliver it. Let’s look more closely at the sources of “junk mail” categorisation and examine how social media may make CRM a more involving experience:

1) Lack of control: Junk mail is called junk mail because it’s not requested. In the social media world consumers control the dialogue; they do the requesting and they are in control. As a brand you are not imposing yourself on the customer. You are simply there for them when they want to engage with you. This is a different dynamic to traditional CRM. It puts the customer in control of the conversation and that’s where they want to be.

2) Irrelevance: Junk mail is called junk because it risks being irrelevant at the time of receipt. Here’s where social media really scores. If you allow the consumer to control the conversation then they are likely to contact you only when they have something important to say. Consumers will either like product, dislike a product or need more help with it. If you are dealing with these issues for customers at a time of their choosing then you are more likely to maximise the relevance of your communication.

3) Environmental issues: Junk mail is called junk because prospects and customers think it’s not green. The statistics around DM paper wastage are staggering and the DM industry should move forward from denial to recognition. It has been estimated that the UK is subject to more than 500,000 tonnes of waste paper through DM every year. Even if it’s recycled we should be thinking about the energy costs of this mammoth recycling task. Whilst all social media has some costs, they are minuscule compared to the environmental costs of paper manufacture, printing and recycling of millions of tonnes of DM. In 2011 brands must be seen to be environmentally aware and social media allows this to happen by reducing your dependence on less environmentally friendly paper-based forms of communication.

Social media gives us the opportunity to reverse the drive train in CRM. It’s time we used the internet to move from putting things into peoples’ homes to inviting people into our brands. It’s time we stopped trying to control the customer. It’s time we put the customer in control of us. It’s time we moved from push to pull. There nothing new here, marketing theory dictates that companies should be responsive to customer and consumer needs. The problem has been that until the advent of easy to use social media networks being open and responsive was easier to say than do.

By moving into social media CRM we open up our relationship with consumers. This sends positive signs. Companies that are prepared to openly discuss issues between themselves and their customer base will be perceived as accessible, caring and confident in the way they provide products and services. These are all valuable brand attributes.

Of course running CRM in social media where all comment can be seen by others requires marketers to have a high level of confidence in the brands and services they are delivering. But rather than being seen as a hurdle to be overcome, this should be seen as a useful litmus test of a company’s relationship with its markets. If as a brand you don’t feel confident enough to open up your CRM in the social media environment then that tells you something about the prevailing relationship you have with your customers. If thinking about social media raises negative issues then you should use this as an opportunity to clarify and address those issues.

And if you are confident that you can press the social media button now, then your openness can only serve to increase the confidence customers and consumers place in your brand.

2011 marketing predictions: The death of mass marketing has been greatly exaggerated

Published / by Simon Foster

No doubt there will be many a New Year marketing prediction over the next few days.  The most common theme is likely to be that mass marketing will decline and be replaced by new and emerging channels and techniques. This year, I’m not going to make any such prediction. This year I’m standing in defence of mass marketing and mass media. I predict that mass marketing as a concept will be as strong this time next year as it is now.  I predict that marketing’s big beasts, the jumbo jets, supertankers and super-trucks of marketing otherwise known as TV, print and outdoor will not die in 2011 nor any time soon.  This year I’m flying the flag for the future of traditional mass marketing and the media channels that enable it.  Why? Because I think mass marketing has been tied down by too many critics for too long. Here then is my defence of mass marketing:

  1. Critics of mass marketing argue that it can’t work because it’s so “expensive”. This has to be a flawed argument. How can something not work simply because it is expensive? Things don’t fail because they’re expensive.  In fact, things that are expensive are, in my experience, likely to be of better quality and deliver a better experience. Yes, mass marketing is expensive from a capital perspective, but that’s because it delivers mass audiences – usually millions of consumers several times over in a campaign – at a very low unit cost. In other words, mass marketing delivers mass value. Here’s an example: If you are buying TV audience at £5 per thousand reaching 20m viewers five times then yes, it is going to cost £500,000  – but you will have delivered your message to a huge chunk of the UK population in a medium that builds brand credibility like no other.  The issue is not simply the overall cost of the activity, but whether or not the activity is delivering the brand or sales shifts required.  Unfortunately, not many of mass marketing’s critics understand how this type of value works. How many of these critics have examined the cost structures of mass marketing channels like TV and print?  How many of them know that it costs a tiny fraction of 1p to reach a consumer for 30 seconds on TV? How many of them realise that TV can be less expensive on a unit of audience basis than many online display, search or affiliate channels?
  2. Critics of mass marketing argue that it can’t work because it is “wasteful”. “It’s not targeted” the critics complain, “it reaches people who are not in your target audience” or “you are buying wastage”. But do they realise that the whole point of mass marketing is to sell products that large segments of the population want to buy? Food, drinks, home appliances, cars, computers, toys, mobile phones, holidays, credit cards, bank accounts, mortgages, furniture and so on. Mass marketing isn’t wasteful when used with products that almost everyone might want to buy in the near future.
  3. Some critics of mass marketing argue that it simply “doesn’t work”. But how many of these critics have pored over the results of the many tests, research projects, case studies and evaluation papers designed to quantify the sales effect of mass media? How many have studied the works of marketing academics and thought-leaders like Simon Broadbent, John Phillip Jones, Byron Sharp, Erwin Ephron, Giep Franzen or Colin MacDonald? How many of them understand the relationship between a £500k TV adspend and a 10% category share gain? Here’s an example. If a brand has a 10% share of a £200m category its share is worth £20m. If a mass media campaign costing £500k helps the brand increase share by 10% from £20m to £22m, then the adpsend of £500k has secured £2m in sales.
  4. Of course if points 1-3 fail to help you win the argument, you might want to ask one of mass marketing’s critics which brands they consume in different categories. Do they drink an unknown brand of soft drink, use an unknown make of PC, contract with a mobile phone network no-one has ever heard of or fly on that airline whose name no-one can remember?  No, they drink Coca-Cola, they use Apple, Dell or IBM, they make phone calls through O2, Orange and Vodafone and they fly BA, BMI, EasyJet or Virgin.  If these critics use a well known brand at least some of the time then somewhere along the way, mass marketing has done its job.
  5. If point 4 doesn’t work, you could invite a critic of mass marketing to tell Simon Cowell that TV and newspapers aren’t effective communication vehicles and see what he says. You might need to stand well back.

And finally, earlier this month the Advertising Association/Warc reported that UK advertising enjoyed its best year since 2004.  “In Q3 TV, out of home and internet were the top performers posting growth of 15.8%, 12.4% and 11% respectively. Direct mail posted a 7% rise, its first growth since Q1 2006″.Although the base was low in 2009 and the future remains “clouded by economic factors”, UK advertising expenditure is expected to increase by 2.3% in 2011.

Not quite dead yet then…. Here’s to a successful year for the big beasts of marketing in 2011.

What is predictive modelling in marketing?

Published / by Simon Foster

Predictive modelling is a term with many applications in statistics but in database marketing it is a technique used to identify customers or prospects who, given their demographic characteristics or past purchase behaviour, are highly likely to purchase a given product. In this context, ‘predictive’ does not simply mean predicting the future; it means identifying the quantitative factors that can be used to predict buyer behaviour. Predictive modelling is a powerful data analysis technique that can be used to target email and direct mail activity, and to some degree behavioural targeting in online media.

Here’s an example: Let say you sell 10 products. It may be the case that all purchasers of product 8 are: 1) in a certain geodemographic group, 2) married with more than one child and 3) own more than one car. All these factors can be analysed and combined to predict the likelihood of any consumer in your database buying product 8. Usually this combined measure is referred to as a ’score’ i.e. a figure which represents the presence or combination of certain variables in the consumer record. Once you have developed your scoring model you can rank all customers by their score. When you’ve stripped out those who have already bought product 8, you are left with a set of high potential prospects.

Predictive modelling can also be undertaken based on transactional information about past purchases. Going back to the 10 products, it may be the case that 80% of people who buy product 7 have previously bought products 2, 5 and 6 and in that order. So we can say that people who have bought products 2, 5 and 6 (in that order) but who have not yet purchased product 7, are much more likely to buy product 7 than everyone in your database. Again a score is attached to these behaviours and that score can be used to rank your prospects in terms of untapped sales potential.

Of course as well as predicting purchase behaviour, these techniques can be used to predict risk. In credit assessment for example, it may be the case that those customers who have certain demographic characteristics combined with a certain type of past purchase behaviour are highly likely to default on a credit agreement. This is sometimes referred to as credit scoring. If you are rejected for credit at a bank or in a shop it will be because your data has been analysed and your credit risk score is deemed too high or low to meet the criteria of the lender.

These predictions can help you target your communications very efficiently and also help you control commercial risk in customer behaviour. What’s interesting about these techniques is that they help both the marketing department and the finance department. Marketing delivers customers who are both highly likely to convert to sales or high lifetime value whilst at the same time, producing customers who are less likely to cause problems for the finance department. Overall, this means that the resources of the business are being better utilised.

On a clear day: Measuring ROI in Social Media

Published / by Simon Foster

Measuring ROI in social media is a big concern for marketers as they consider moving budget away from traditional media channels and into social media activity.  But before they can invest in social media, marketers need to get an idea of what it can contribute to their brand.  This has driven a debate about measurement in social media but unfortunately much of the discussion is focused on measuring social media for social media’s sake. What we should be asking is how do we measure the delivery of marketing objectives when we run activity across the social media platform. When we look at it this way we focus on measuring marketing outcomes versus marketing objectives and the answers become much clearer.

As a start point, everyone needs to recognise that social media is a media channel. It is not a marketing discipline. It is not a marketing objective. It is not a marketing strategy. So we might use the social media channel to raise brand awareness (objective) by targeting affluent new car buyers in social media (strategy), we might use social media to increase consideration (objective) by informing new car buyers about the unique benefits of the car we are selling (strategy) or we may use it to increase sales (objective) by communicating a last minute ‘walk-in’ trade-in deal (strategy). The metrics we use to measure social media should therefore relate directly to the objectives and strategies that we managing through the social media channel.

So, before we can measure social media we need to understand what we want social media to deliver from a marketing perspective. Only then can we select the right types of measurement and metrics to get the job done properly. Here are three examples of how we might measure social media activity against the delivery of three different marketing objectives:

  1. Objective: Raise Awareness: There are a number of good tools for measuring online brand awareness, ad awareness, product awareness and salience. Ad Index from Dynamic Logic allows you to play ‘spot the attitude difference’ between web users who have been exposed to your messaging and those who have not. You can ask exposed and non-exposed groups bespoke questions about your brand and campaign activity which allows you to contrast and compare the differences between the two groups. Brand sentiment can be measured using sentiment trackers like Sentiment Metrics; through without bespoke surveys these may include a range of external references to your brand, not just your own social media activity.
  2. Objective: New Customer Acquisition: If we want to use social media as a new customer acquisition tool then we should be using customer acquisition metrics. Microsoft’s Atlas can be used to track the online behaviour of your social media users across all touch points in the sales funnel. Bespoke tracking URLs in your social media pages can be used to identify visitors to your site originating in your social media pages. This type of tracking means you can ultimately relate customer value back to your social media activity.
  3. Objective: Increase Retention / Loyalty: Here we can combine online tracking, data collection and customer data analysis to understand the contribution of social media. We can collect prospect and customer data in social media pages or in pages that link directly to social media. Fusing data collection with online tracking means we can find the data source of known named customers and measure their progress and value in the sales funnel and through cross sell and up-sell. The results from this type of activity may not be instant; customer value from market source can take a year or more to establish, but once it’s in place you will be able to see how social media is building sales revenue for your business.

The message is that we can’t measure social media for social media’s sake. We should always be measuring how social media performs against a given marketing objective. If we are clear about this, the techniques and metrics for measuring and evaluating social media ROI become much easier to identify, select and implement.