Category Archives: Comms Planning

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.

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.

Can marketing use social media networks for advertising?

Published / by Simon Foster

So the mighty P&G has spoken about social media. When these companies speak the marketing community has to listen. These guys think long and hard about the issues to cut straight through the hype. I know because I did it for Unilever. I worked directly with Unilever digital teams to help them understand the real value of digital media to their business. So, what was the basic message emanating from P&G? Well it’s that social media is not “media” and there’s no point in advertising around “someone breaking up with their girlfriend”.

I disagree slightly with the first part of this criticism. Social media is a form of media because it is space which carries content and delivers an audience that can be traded for money. From an advertising perspective these are the core characteristics of a “medium”. The big question comes when we try to explore what type of medium social media actually is.

In reality social media is not social media, it’s personal media. Social media is really comprised of groups of individuals sharing their personal communications. These social media communications are online versions of personal phone calls, text messages or letters. And whilst in some cases individuals may be prepared to publish these communications, it doesn’t follow that advertising placed in them will be effective. Such advertising is the equivalent of a radio ad in a phone call.

Advertising media planning is no longer about reach (and sites like Facebook certainly deliver reach). Twenty-first century media planning is about going deeper than reach, it’s about delivering mindsets, engagement and involvement. And it’s a fact that whilst an individual is deeply involved in a personal communication, like dumping their girlfriend, they are unlikely to engage with advertising in or around that communication. This notion was encapsulated by David Ogilvy who once observed that you’re more likely to get the best direct response from an ad placed in the afternoon movie repeat than in the latest episode of Dallas (The big hit drama of the day). In other words, advertising can’t win when competing with high value content.

A few months ago on I wrote “Advertising on social networks is a Web 1.0 technique in a Web 2.0 world. It may be the case that carrying ads is not a sustainable route for these networks or for advertisers.” I think this remains the case. It’s a problem for the likes of Facebook though, because if they cannot monetize their inventory their value will fall. So how might sites like Facebook monetize their inventory? I think their answer is to monetize the relationships they have with their users. But this isn’t an ad model. It’s something more akin to Seth Godin’s permission marketing and value exchange. Facebook has a brand franchise. It needs to provide added value to its users by teaming up with partners and offering deals to its users. Social media should be an enabler which allows companies and individuals to exchange value.

Advertising Frequency and Diminishing Marginal Utility

Published / by Simon Foster

diminishing-marginal-utility

Economists have a concept called Diminishing Marginal Utility. This means that each additional time a consumer consumes something they get less satisfaction from consuming it. So, if I have one coffee, I find it very satisfying, two could be OK, but by the time I get to three I’m not getting much additional satisfaction, infact, I’m going off coffee pretty fast. And if I were to drink ten coffees I’d feel like I was being tortured.

Now let me apply this thinking to the world of TV advertising and in particular, sponsorship. In the UK, quality drama is a favourite for sponsorship. One of the reasons for this is that these programmes attract a high quality loyal audience who make an appointment to view. Certain drama strands can be sponsored heavily in a cross-programme deal covering different programmes in the same genre. Whilst this may appear to present great media value it can mean over-exposure for both brands and consumers. Seeing a break bumper a couple of times is fine, but seeing the same branded break bumper ten times in the same evening can seem like drinking that tenth cup of coffee.