Marketing Tactegy

The long term value of advertising

I put together a white paper on the long term value of advertising.  It was kind of interesting, because it represents some of the software we have used to determine the real value of marketing.
The key question to ask in refining this paper is:  ‘What is the incremental or decremental, long term effect of advertising if advertising were halved or advertising were doubled?’  Here is the link:

Click now:  Long Term Value of Advertising.pdf

The paper differentiates between short, medium, long and very long term effects of advertising but focuses on the medium and long term value.  The key items in determining the long term value of advertising is broken down into:

1. Purchase funnel and emotional effects (e.g., awareness, consideration and purchase intent)
2. Brand imagery – the value of the brand attributes in the minds of the consumer
3. The ‘memory of the web’ (e.g., cross-links that drive SEO and social media clouds)
4. Brand equity – e.g., any advertising this year drives value in the following years
5. Customer equity – a newly won customer is more likely to re-purchase from you than a non-customer
6. Consumer preferences – the education of the consumer that leads to higher preferences for certain brand and functional attributes
7. Creative concept – there are some great creative concepts (“Two scoops of raisins in a box of…”- Kellogg’s Raisin Bran or ‘I’d like to teach the world to sing..” – Coca Cola)

The definitions are currently defined for consumer packaged goods, but can be applied to just about any industry.  I will be writing a separate paper including the differences in the long term value of advertising between consumer and business-to-business marketing.

If you get a chance, let me know your feedback.  If there is anything I left out of the framework to analyze the long term effects of advertising, please let me know.

Marketing and marketing ROI in a Recession

Everyone seems to be writing on this topic so I thought I would also chime in.  Times aren’t great for marketers, unless you have a couple of key arrows in your quivers   It’s not easy to cope, when it seems like nothing is working, sales are down 30 to 40% and the company is threatening payroll cuts.  And the CFO and CEO are saying cut your advertising budgets by 30% or else.

As we put our plans in place to survive (and thrive) in this market, what we’ve seen from our clients is that consumers seem to be trading down.  Instead of purchasing extravagant or luxury items they are holding off until they have confidence about the future.  They are looking for the bare minimum, the absolute necessities and where they can get these at the best price.  Discount redemptions are going up. The value placed on a premium brand is falling.  Instead of shopping in their preferred channel, they are shopping in a channel known for low cost.  WalMart comes to mind.  WalMart reports they are doing very well across most categories, although this may also be due to lower gas prices. (February Retail Sales Stronger Than Expected, by Sarah Mahoney in MediaPost, http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=101585)  Our own anecdotal evidence shows that other value brands and offerings also seem to be doing well.

Consumer behavior and choice

If this is the case, what has changed in consumer behavior and how can we potentially change our thinking to take advantage of this dynamic.  Here are a couple of thoughts and questions: 

1. Are shoppers simply trading down in their channel selection but purchasing premium brands in a value channel (as WalMart’s success might allude to).  Do marketers need to focus solely on lower price or will shoppers trade down in their channel selection and trade up once in the door?  Do we need to maintain our premium price in the value channel, or do we need to cut prices across the board?
2. If consumers have temporarily exited the category, how can marketers retrieve them in order to re-grow the category and then drive preference for their brands? 
3. Once consumers are shopping in the category how have consumer preferences changed and do brands need to change their messaging to take advantage of it.  Once consumers have chosen to purchase in a specific category consumers make choices based on a combination of their preferences for specific functional and emotional attributes.  For example, has the emotional preference for the ‘good value for the money’ brand attribute changed, or has the disutility of price changed?

I’m sure there are other questions we could start to ask ourselves and our consumers in order to determine how consumer behavior has changed and how we can potentially take advantage of these changes.

I would love to hear what you’re experiencing as you try and survive and thrive in the uncertain economy. 

I also have a question for you and that is, how do you see your marketing investments changing over the next two quarters (Q209 and Q309)?  Will spending be made to gain share in a down market, or will the finance team win and marketing will be cut to maintain margins?

I look forward to your views.

Nielsen Shopper Modality Study

I just read this article in Marketing Daily on The Nielsen Shopper Modality Study, conducted by the Consumer Research division within Nielsen's proprietary Shopper3 (Shopper Cubed) Insights framework combining primary survey data with Nielsen scan data (“Understanding, Leveraging Consumers' Five CPG Mindsets”, Marketing Daily, by Karlene Lukovitz, Thursday, Oct 16, 2008 6:38 PM ET (http://www.mediapost.com/publications/?fa=Articles.san&s=92836&Nid=48438&p=459501)).  Five CPG mindsets resulted:

Indifferent Auto-pilot & Blinkered Auto-pilot - bathroom cleaners, bar soaps, dishwashing soap and cotton swabs
Browser mindset - shampoo and conditioner, body washes, and toothpaste and brushes
Buzz mindset - hand and body lotions, air fresheners and baby toiletries
Bargain-activated mindset - toilet paper, laundry detergent, paper towels, facial tissues, liquid hand soaps and batteries

With Indifferent Auto-pilot and Blinkered Auto-pilot one of the implications is that the package should not change very often, because this would lead to potential confusion at the ‘delta moment’ of choice at the shelf.  This has implications for the management of brand management.  Many of the larger CPG companies have a policy that moves the brand managers from one brand to the next every 6 months or so.  Just as they are getting to know the brand, they move on.  For the brand managers to make their mark, they want to do a brand refresh, a packaging change and introduce change specifically in a category that doesn’t want it or need it.  In this case for these categories more consistency and less planned turnover can lead to incremental gains in revenue and better marketing ROI.

If you have any thoughts I would love to hear them.

It’s not share of voice it’s share of conversation

I was just working through a social media strategy session and realized that many companies still don’t quite realize the value of social media and that it’s not just about running a good (or bad) social media campaign.  It’s about understanding the strategy for your social media, including short and long term results.

Competitive social media strategy

Looking at social media isn’t about Twitter, blogs or Facebook.  It’s about how your actions compare to the competition and how you can deliver your share of conversation.  Just as it’s about market share in the physical world, it’s about share of conversation in the social media world.

Share of Conversation

Share of voice sounds like a great outcomes metric, but voice implies a one-way conversation, not to mention the fact that it is already used to measure the value of traditional media in a competitive market.  Social media is about engagement and a two-way conversation.  There is value being transferred from the brand and value being provided by the consumer.  There is a conversation taking place and it needs to be the goal of social media activities to determine an effective strategy to improve the share of conversation.  Once that has been done, the social media strategy can start to determine how to increase share, beat the competition and do it in a way to drive brand value and market share in the physical world.

I’d love to hear from you to see if this makes sense.  Just let me know.

Ingredient Branding

I have been invited to participate in the early stages of a hot topic called ingredient branding.  The topic comes about because of the effective marketing of such brands as ‘Intel Inside®’, Dolby®, Teflon® and Stainmaster®.  Each of these brands is purely a component or ingredient combined with many others to deliver a final consumer or business product.  This field of study is just starting up and should lead us to some interesting marketing applications as we determine the value of the ingredient brand. 

The Choice Model

Consumers make choices along three dimensions: 

1. The utility derived due to the preferences for the attributes
2. The utility derived due to the preferences for the brand
3. The disutility of price

With ingredient brands the preference for the brand bifurcates into two sub-dimensions:  The preference for the brand of the product and the preference for the inclusion of the ingredient brand.  How many consumers (or businesses) would pay more to have the same capabilities in a Dell® laptop with Intel Inside® or with AMD® inside?  In this case we are looking at understanding a two by two matrix, where the choice is between Dell and some other brand each with either Intel or AMD inside.

The Channel Choice

In a similar way consumers make choices of a channel based on the expected value of a brand purchased in one channel versus another.  I used to work with an upscale marketing professional that would brag that he bought such and such brand in such and such store.  When I asked ‘why didn’t you buy the same product in Wal-Mart and save 25%’ the answer was typically ‘I don’t shop at Wal-Mart’, or ‘they don’t provide the same level of service’ and so on.

So in some respects the product and the brand have different values based on the ingredients and based on the channel where it is offered.

I will keep you up to date as we learn more on this fascinating topic.  If you have any specific questions or comments about ingredient branding, please let me know.  I look forward to hearing from you.