Improving Marketing Effectiveness

CIM Summer Marketing Conference ~ 14th June 2012

Contacts: Sally Dickerson Global Director t: +44 (0)20 7470 5341 Tosin Osho Consultant Manager t: +44 (0)20 7470 5453 Ground Floor | Minerva House | 1-4 North Crescent | Chenies Street | London | WC1E 7ER www.brandsciencenetwork.com

Agenda
BrandScience: who we are and what we do
Introduction to Econometrics Example outputs from Econometrics projects Evaluating Paid Owned and Earned Media

BrandScience: who we are and what we do

We are a specialised marketing consultancy practice using advanced statistical analysis. We enable clients to quantify marketings contribution to business performance and improve its subsequent returns.

Capabilities and Tools

Econometric Modelling Measuring marketing contribution and improving its returns by identifying marginal returns. Investment Planning Understanding how much and where to invest to maximise returns. Knowledge Utilising our Results Vault of over 1000 studies through the application of meta analysis.

Forecasting
Predicting future market growth using macro economic indicators as well as marketing inputs.

Purchase Funnel Analysis

Understanding how marketing affects consumer opinion and the subsequent sales effects.

Scenario Tools
Embedding analysis into business & comms planning and execution.

BrandScience: who we are and what we do

BrandScience is a global player in marketing effectiveness

Real teams in 14 offices across the world. The Global HQ is in London with 25 people servicing centralised business and UK business By our global presence and size we acquire accelerated knowledge and benchmarks on marketing effectiveness in every sector

BrandScience: who we are and what we do

BrandScience use a holistic approach to evaluating marketing effectiveness

BRAND RESPONSE
CAMPAIGN RESPONSE
Response Media
Ad awareness Message take out Cut through

PHYSICAL RESPONSE
Sales
(or other response e.g. footfall)

Consideration Media
Other Comms Sponsorship, PR Earnt Media e.g. WOM
Product changes, promotions, other marketing activity

MARKETING

BRAND IMAGERY & PERCEPTION

Value, Quality Trust, Knowledge

BUSINESS New Customers EFFECTS

Value Longevity Loyalty Financial Performance
P&L, Cashflows

BRAND INFLUCENCE DYNAMICS

Advocacy (NPS) Consideration Preference

EXTERNAL Competitive Activity FACTORS

Macro Economics Market Trends

BrandScience: who we are and what we do

BrandSciences current and recent clients Goods Services

Sainsbury's Finance

We know our clients need to understand all aspects of their business and brand success. Typical questions
How effective are non-traditional communication channels like search or WOM?

How effective is our marketing and advertising investment?

How should I allocate my budget by communication channels?

What is the optimal level of investment and what is the best lay down to maximise revenue?

How will advertising work if the market is contracting? Where could we reduce marketing investment without detrimental impact on revenue?

How effective is my PR investment?

Agenda
BrandScience: who we are and what we do
Introduction to Econometrics Example outputs from Econometrics projects Evaluating Paid Owned and Earned Media

Introduction to Econometrics

Econometrics is a statistical tool that enables us to quantify the key drivers of sales or any other KPI
What is an econometric model? A statistical method for examining the relationship between one dependent variable and a set of several explanatory variables called multiple regression analysis Originally used to analyse economy, now to analyse marketing

mix

Why are they useful? Help understand all the factors driving sales (not just communications), not just factors under your control Informed decisions

Budget allocation Media Mix Marketing Activity

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Econometrics: How does it work?

Data Brainstorm & Collection

Identification and collection of key data. All data is then cleaned, aggregated, harmonized and transformed into variables that can be modeled

Multivariate Regression Analysis

Determines which factors are STATISTICALLY SIGNIFICANT and the MAGNITUDE of each factors impact

Value Added Insights

Turning results from statistics into marketing insight

Can be used to ESTIMATE future sales

And to determine more effective marketing spend

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Introduction to Econometrics

Econometrics is like baking a cake!

If sales are like a cake, econometrics determines the recipe, by re-baking lots of cakes until we find the right weight of ingredients to reproduce the brands sales cake

Ingredients
Advertising x Medium & campaign Sponsorship Direct Mail / Email Campaigns PR /Buzz Promotions x mechanic x variant Pricing x variant Availability x variant Product Changes Purchase Channel Dynamics Competitor Pricing Competitor Availability Seasonality Economic Change

Technique assigns a weight to each ingredient, and works out which ingredients are important Once the recipe is known, past volume is explainable and future volume is predictable
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To isolate and quantify drivers of your KPI, e.g. sales, awareness, consideration

DM Print

TV1

TV2

PR SALES

Price discounts

Outdoor

Distribution 1

Base, Seasonality and other factors

WEEKS

We relate the sales uplift to the investment in each strand to determine ROI
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What econometrics can do

Quantify factors that affect sales Provide accountability (by measuring the ROI of comms. Investment) Provide a starting point For the strategic planning process For investment allocation

What econometrics cant do

Tell the impact of something that hasn't been done before Tell accurately the impact of doing something at levels way beyond that already experienced Work without (good!) data Always tell a positive story, it may bring bad news (but then we are informed and we can take appropriate action)

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Agenda
BrandScience: who we are and what we do
Introduction to Econometrics Example outputs from Econometrics projects Evaluating Paid Owned and Earned Media

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The Results Vault collates data from over 1100 econometric studies conducted by BrandScience
Meta analysis of this allows for detailed examination of media performance by channel and sector with many findings on how advertising works: Absolutely Relative to and in synergy with other media Over time

Over

200 case studies addressing particular issues

Brand vs Product Impact of PR Effectiveness of non-traditional media Daypart changes etc

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Global Services RROI

Aggregating the results from all Services brands analysed, Print is the most efficient medium (results will vary by country, sector etc)

Global Services ROIs

10.00 9.00 9.33 7.85 6.27 5.21 4.55

8.00

Incremental Sales revenue generated for each 1 of media cost

7.00

RROI

6.00 5.00 4.00

3.00
2.00 1.00 0.00 TV Outdoor Print Radio Online

Share of spend

42%

15%

18%

9%

13%

Sample Set: Global Results Vault studies (2002 -2012) as at 12th Feb 2012 includes production costs 17

Global Goods RROI

Aggregating the results from all Goods brands analysed, TV is the most efficient medium (results will vary by country, sector etc)
Global Goods ROIs
4.00 3.50 3.40

Incremental Sales revenue generated for each 1 of media cost

3.00 2.50

RROI

2.00 1.50 1.00 0.50 0.00 TV Outdoor

1.71

0.93
0.22 Print Radio

0.85

Online

Share of spend

38%

23%

11%

10%

7%

Sample Set: Global Results Vault studies (2002 -2012) as at 12th Feb 2012 includes production costs 18

The econometric results are built into a tool which allow the clients to scenario plan

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Budget setting using econometric modelling

Modelling can be used for setting the optimal budget to maximise sales and profits
Annual Financial Contribution (000s)*
Thousands

229,000
Financial Contribution Investment) Volume Sales

5,000 4,900 Sales in 000s units Asymmetric volume sales: There is more to lose by decreasing spend than there is to gain from increasing it The PROI maximising level of spend is 12m pa 4,800 4,700 4,600 4,500 4,400 4,300

227,000 225,000 223,000 221,000 219,000 217,000 215,000

Annual Spend (000s) *Financial Contribution: (Total units * MPU) Media investment Dotted line represents spend levels beyond the maximum experienced over the modelled period
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Media seasonality

By combining sales seasonality with media seasonality we can determine which months will be most profitable to advertise within
175% 150% 125% 100% 75% 50% 25% 0% 150% 125% 100% 75% 50% 25% 0% 175% 150% 125% 100% 75% 50% 25% 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec TV Efficiency Index TV Cost Seasonality Index 2010 Volume Sales Seasonality Index

Brand X shows higher volume sales in winter months

However, TV Costs are highest through April May With relatively cheap TV available in Jan/Feb and Nov/Dec.

If we combine TV costs with the seasonal indices measured via the econometric modelling, the most effective period to advertise is within the first half of the year.

Source: BrandScience, Zenith

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Optimal laydown We are able to test different flighting patterns

Efficiency Index
120 100 80 60 40 20 0 1,000 800 600 400 200 0

Volume (000s)

Act TVRs

Act TVRs Incremental Volume

115

120 100 80 60 40 20 0

1,000 800 600 400 200 0

Volume (000s)

Act TVRs

Act TVRs Incremental Volume

100

120 100 80 60 40 20 0

1,000 800 600 400 200 0

Volume (000s)

Act TVRs

Act TVRs

107
Incremental Volume

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Agenda
BrandScience: who we are and what we do
Introduction to Econometrics Example outputs from Econometrics projects Evaluating Paid Owned and Earned Media

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POEMS - Paid Owned Earned Measurement System

BrandScience have developed a system to provide comparable measurement for all these communication channels (total marketing cost and reach). This allows us to compare their relative impact on brand and business outcomes.

Planned

Paid

Owned

Earned

Unplanned
Paid for media: Print, TV, Radio, Cinema, Outdoor, Online, DM, SEM/Paid Search, In-store Media Owned Communication Channels: Website, brochure, retail stores, microsite, community, Facebook fanpage, mobile apps etc Earned Communication: Planned PR (press releases, news coverage). Unplanned coverage (online and offline word of mouth and coverage)

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POEMS Predicts - REACH

Multiple relationships and synergies between Paid, Earned and Owned

Owned

Unplanned Earned

By measuring these relationships, we can understand how paid communications stimulate participation with owned and earned channels.

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POEMS Predicts - REACH

Calculating the combined and exclusive reach of all communications

Owned Paid
Unplanned Earned

Planned Earned

COMBINED REACH:

The number of people reached by any communication channel, excluding duplication.

EXCLUSIVE REACH:

The number of people only reached by that communication channel.

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POEMS Predicts - BRAND AND BUSINESS

The final step linking the comms effect on brand/business measures

Owned

Brand Measures

Unplanned
Earned

Business Measures

The Holy Grail! Understanding how all the communication channels work individually and together to drive brand and business measures.

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The POEMS Pilot Study, sponsored by Channel 4:

A meta analysis of supermarket, car and retail brands within the UK

As part of the project, were delivering: POEMs Predicts Reach POEMs Predicts Brand, and POEMs Predicts Business

We have gathered data for: 29 car brands (High Interest category)

22 supermarket brands (Low Interest category)

58 other retail brands high street, fashion and retail (Analysis underway)

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Note: not all car brands and supermarkets were included in the final models due to data availability and outliers

POEMs Input Data Overview

We gathered a vast amount of comms data on Paid, Owned and Earned channels and we are the first study to incorporate Offline WOM
Data Source: Nielsen Spend and Reach by media type Spend by TV group
Data Source: Brandwatch Mentions on Twitter, Facebook, YouTube, Blogs, Forums, General/Video pages

Data Source: Comscore Website visits

Earned

Owned

Brand Measures: Brand Index Buzz Quality Value Recommendation

Business Measures: Market Share/Sales
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Paid
Data Source: Techedge Sponsorship TVRs by channel

Data Source: Metrica PR Impacts on National, Regional, Business and Consumer Press

Data Source: Allfacebookstats Brand page fans and posts

Data Source: Keller Fay Offline WOM Conversations

Data Source: ABC Brand publication circulation

syndicated monthly data available for our pilot sectors

A snapshot of the Paid data we are evaluating, year 2011

Supermarkets
Average Brand Annual Spend: 71.8 m Biggest Spenders (2011): Tesco, 129m Asda, 108m Morrisons, 76m

Cars
Average Brand Annual Spend: 17.5m Biggest Spenders (2011): Volkswagen, 33m Ford, 27 m Vauxhall, 25 m Lead Medium: TV

Lead Media: Press & TV

Total Paid Media Spend % by Channel - Supermarkets

Outdoor 3% Direct Mail 5% Radio Door Internet 1% 3% Drops 2% Press 45% TV 41% Cinema 0%

Total Paid Media Spend % by Channel Cars

Outdoor 8% Cinema Direct Mail 3% 5%
Door Drops 0% Internet 5%

TV 41% Radio 8%

Press 30%

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Remember that Internet spend is Display only

We have now identified the relationships between Paid, Owned and Earned media, and how they drive brand and business success. Arrow shows a statistically significant relationship.
Communication Channels Brand/Business Measures

Earned Brand Measures Paid Owned Online only*

(Brand Index Buzz, Value, Quality and Recommen dation)

Business
(Market Share)

31 Note: data is incomplete for all owned channels, we have only included Online Owned

Paid Media is the biggest driver of all earned channels: PR, Twitter/Facebook, offline WOM (1)
For Supermarkets & Cars: Paid is the biggest direct driver of all Earned metrics (driving at least 65% of each measure for supermarkets and 10% for Cars) TV is the strongest Paid driver of Offline WOM
Communication Channels Brand/Business Measures

Earned Brand Measure s (Brand Index Buzz, Quality and Value)

Paid

Busine ss (Market Share)

TV also drives 18% of all Facebook/Twitter Earned directly for supermarkets - the figure is 9% for cars (all other Paid only driving 1% of Twitter/Facebook

Owned Online only*

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Paid Media is the biggest driver of all earned channels: PR, Twitter/Facebook, offline WOM (2)
Our creative analysis says that to maximise the effectiveness of r paid campaign on Offline WOM creatively, an Integrated campaign will uplift effectiveness by 12% for Supermarkets and 14% for Cars For Cars a Salient campaign further enhances effectiveness by 25% A celebrity involved in the campaign also has a strong uplift on effectiveness for both Supermarkets (+24%) and Cars (+112%) An emotive, humorous and notable music will also help to drive an effective campaign for Cars
Communication Channels Brand/Business Measures

Earned Brand Measure s (Brand Index Buzz, Quality and Value)

Paid

Busine ss (Market Share)

Owned Online only*

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Paid Media is the biggest driver of market share (more so for Cars than for Supermarkets)
Paid is the biggest driver of market share, driving a high 15% of market share for Cars and a lower 4% for Supermarkets TV is the biggest Paid channel to drive market share driving 6.3% for Cars directly and 1.7% for Supermarkets Earned Media is particularly effective in driving market share for Cars driving 5.7% directly A highly Integrated campaign will uplift advertising effectiveness by 6% for Supermarkets
Paid Communication Channels Brand/Business Measures

Earned Brand Measure s (Brand Index Buzz, Quality and Value)

Busine ss (Market Share)

Owned Online only*

a Salient campaign will uplift effectiveness by 31% for Cars

A campaign featuring a celebrity will further uplift your campaign effectiveness by 27% for Supermarkets

Whilst Humorous and campaigns with Notable Music will uplift effectiveness for Cars

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Thank You

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Improving Marketing Effectiveness

CIM Summer Marketing Conference ~ 14th June 2012

Contacts: Sally Dickerson Global Director t: +44 (0)20 7470 5341 Tosin Osho Consultant Manager t: +44 (0)20 7470 5453 Ground Floor | Minerva House | 1-4 North Crescent | Chenies Street | London | WC1E 7ER www.brandsciencenetwork.com