Marketing Tactegy

Long Term Value of Advertising for B2B Marketers

I wanted to let you know I just finished a new version of our last whitepaper:  The Long Term Value of Advertising for B2b Marketers.  If you are a B2B marketer, you can download it here:

 http://www.Marketing-Calculator.com/Files/LongTermValueofB2BAdvertising.pdf

I would love to get your feedback.

 

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.

MarketingProfs B2B Forum 2009

I just got back to my desk after a week of vacation and 2 days of conferencing at the MarketingProfs B2B Forum and I must say, the conference was one of the best I've been to. I haven't figured out what the underlying reasons were for this reaction, but it was nevertheless a great opportunity to network and change the way you think.

Top events at the MarketingProfs B2B Forum

Here are a few things that absolutely stood out:

1. Sandy Carter's talk (from IBM) on the actions they are taking in the social media space. What a great set of examples. (http://www.booksbysandy.com/)
2. Amy Africa's website optimization 'family feud'. The format was put on as a family feud instead of the typical PowerPoint and speech with case studies. It was filled with facts and ideas that might not even fit into Santa's gift bag. What a great, invigorating way to get key concepts across.  (http://www.eightbyeight.com/)
3. The 20 minute one-on-ones put on by experts in different fields. These included web usability, SEO, social networking and others. These were free and certainly give you some great ideas to get you out of your rut.
4. he keynotes were great.  Steven Johnson certainly made clear how he has been successful at social media and the effects of being of the cover of Time magazine.  Barry Schwartz had some interesting points about bringing forth a new moral order.

Key B2B marketing problems

But the interesting question was the difficulty B2B marketers have in determining marketing effectiveness.  Especially since they are trying to improve their marketing mixes, deliver better on corporate objectives and finally prove marketing’s contribution to sales. The key areas still looking for answers include:

• Last touch attribution
• Objectives-based budgeting v. media-based budgeting
• Sales and marketing alignment and collaboration
• The definition of a lead
• An inward-looking view of marketing as opposed to a consumer-centered approach

I’m sure there are many others.  If you have any thoughts, I would love to hear from you.

5 Key Questions for Marketing ROI 2010

I was talking with one of my clients and having just completed a very fascinating project, I thought I would put this together.  It lists 5 questions for planning marketing ROI for 2010.

I’m sure there are many more, but I believe that these encapsulate the issues that we need to think about as we go into 2010 after having survived 2008 and 2009.

www.Marketing-Calculator.com/Files/5_Key_Questions_for_Marketing_ROI_2010.pdf

I would love to hear your comments.

 

What is the long term value of marketing?

There have a been quite a few blogs and other posts talking about why more smart marketers aren’t trying to make the case that investing in a recession can help a company be stronger once the recession is over than competitors that don’t invest.  This spurred the question, how should we define the long term value of advertising, (whether it’s during a recession or not.).  Here are my thoughts.
Advertising has both a short term and a long term impact.  (For the purposes of this document, I am defining advertising as any message received about a brand or the category, regardless of whether it was received directly from the manufacturer through mass media or direct response, or indirectly through the distribution channel, experts & endorsers, other consumers or any other brand information sources.)
Short term advertising effectiveness can probably best be measured based on last touch attribution (see a previous post on this topic.)  This method attributes all revenue to the last touch, regardless of prior or concurrent touches.  It totally ignores any residual effects that accrue to marketing as described below.
Medium term advertising effectiveness includes the impact on the emotional impressions of the brand.  There are two dimensions:

• Awareness – Awareness for a brand typically has a long term effect.  Awareness decays over time, where a particular consumer is either aware of the brand or unaware of the brand.  There is no partial awareness.
• Consideration set – Just having awareness of a brand doesn’t mean it’s in the consumer’s consideration set.  What brands require is that the advertised brand will be considered as one of the choices in the category.  Advertising must keep the brand in the consideration set by continuing the advertising.  If advertising is discontinued, a brand may eventually fall out of the consideration set.  This is probably certainly true for categories that are highly considered where the consumer is expecting that the value of their purchase will provide long term benefits, either through a valid warranty or through the brand impact of a purchase among friends.  (e.g., ‘I like to be seen showing off my branded clothing’).  Consideration also decays over time.  Just as in the case of awareness, the consumer either holds the brand in the consideration set or not.  There is no partial consideration.
• Purchase intent - The incremental intent to purchase attributed to a specific media channel.  This decays over time as well.  Purchase intent, however, can be any value and therefore can be either increased, through more advertising, or reduced through the lack of advertising.
• Brand imagery – The attribute association scores measured in many brand health tracking studies.  The association scores can be strengthened based on the message (s) in the creative.  These include attributes such as, ‘this brand is good value for the money’, ‘this brand is eco-friendly’ or ‘this is a luxury brand’.  They are emotional and driven by both the advertising and prior experience with the brand.

Each of these have some decay rate if no further messages are received about the brand.

Long term advertising effectiveness has two components:

• Brand equity is an emotional consumer element that lasts significantly longer than the purchase intent above and can be interpreted as the residual marketing impact that makes any future advertising more effective.  That is, any advertising this year delivers value in the following years.  This too, probably has some decay rate if no further advertising is done, although I haven’t seen any discussions to this effect.  Its impact is also affected by external events.  If the brand has high brand equity, the impact on future purchases is present.  In a recession, however, the impact is reduced.  In uncertain economic times the value of investing in long term brand equity is lower because of potential deleterious effects outside of the control of the brand.
• Customer equity can be defined as all those customers that have tried the brand at some point in the recent past.  (It is sometimes called penetration).  Since a consumer has used the product/service in the past less advertising will be required to induce them to use it again (assuming there was no negative customer satisfaction event).  Investing in customer acquisition has a higher long term value over just advertising to drive revenue from existing customers.  This long term effect may also be slightly different for an initial trial versus continued usage.  Just giving out samples may not have the same customer equity value as a consumer actually purchasing a brand and consuming it.

Some exceptions to consider:
1) If there was a negative customer satisfaction event, this can be overcome, but it would require a bunch of advertising, or another negative customer satisfaction event from their new competitive provider/brand?
2) How does advertising drive ubiquitous brands like Coca Cola or Pepsi?  I have been told there is a long term advertising effect to advertising.  Also, what is the long term value of Coca Cola’s sponsorship of the Olympic games?

Very Long term advertising effectiveness - Is there a very long term brand value?  For example, when I was a kid, I loved the Ferrari.  I still do.  Is there any value today, based on the advertising and marketing undertaken a few decades () ago?  Is there any present value of advertising, based on results that may or may not be achieved decades from now?

Implications for marketers

A few questions to think about:

• For fast moving consumer goods (FMCG) marketers with high penetration and an older brand, how can marketers deliver incremental medium and longer term value to their marketing?  Very little marketing will drive customer equity, since the brand already has high penetration.  Is there incremental customer equity delivered through a line extension in the form of some new variant with some new (or perceived) attribute.  Or is marketing all about driving short term purchase? Or should marketing now harvest the brand and reduce advertising to an extent that market share stays about even?
• For FMCG marketers with a new brand, what is the optimal mix between driving brand value, short term sales and customer equity?
• For highly considered products and brands that are purchased infrequently (e.g., life insurance or a car), how do these classifications differ?  Short term advertising may deliver new customers where the customer is already in consideration.  After all of the long term brand building done, the consumer is finally ready to purchase and is spurred to purchase your brand due to some short term offer or advertisement.

Have I left anything off?  I’m sure I have.  Please let me know.  I would love to hear from you.
If you’d like to hear about some tools to support marketers in these areas let me know.  Many of the currently employed tools don’t quite cut the mustard to provide the tactical and strategic decision support necessary to make the best decision and reduce risk.

Marketing Effectiveness and ROI – now in Malaysia

It looks like my calendar is filling up for the summer.  After the June conference in Boston, in July I have been invited to speak and present a full day marketing ROI workshop in Melaka, Malaysia at the INCOMAR 2009 (2nd INTERNATIONAL CONFERENCE on MARKETING and RETAILING 2009) conference put on by the Chartered Institute of Marketing Malaysia and the Universiti Teknologi MARA.  I’ve spent a lot of time in Malaysia recently and it should be fun to be able to put on this presentation and workshop with this group. 

Many of the concepts from my book, Marketing Calculator:  Measuring and managing your return on marketing investment.

For more information, please go to:  www.marketing-calculator.com.

I hope you can attend. 

Upcoming MarketingPROFS B2B Event

I wanted to let everyone know that I will be speaking at the upcoming MarketingProfs Business-to-Business Event in Boston June 8th and 9th.  It should be pretty interesting because we will be speaking about dashboards and how to properly structure them to manage marketing activities and results.  Many of the topics in my recent book are critical to a successful implementation of a marketing dashboard.

Overall it should be an interesting event.  Since I work both in the B2B and the consumer space I found that B2B marketers often have a much more difficult time than consumer marketers trying to managing their marketing because of the interaction with their sales teams.
Information on the event can be found at Marketing Calculator Press Releases.  I hope I’ll get a chance to see you there.

If you’re going to attend please let me know. 

Challenges in Statistical Marketing Mix Modeling

Benefits of Marketing Mix Modeling

Marketing Mix Modeling has been used for many years now and has been able to help marketers significantly improve their marketing budget allocations and other key tactical marketing decisions.  It has led to many improvements for many companies in how they drive revenue, profit and share,  helping marketers to choose creative campaigns and many other critical tactical decisions.  They allow analysts to relatively easily deliver models that support budget allocations and diagnostics to drive more revenue out of their hard-won marketing budgets. 

Challenges of using Marketing Mix Modeling

One of the biggest challenges in  modeling is on the data.  Now in the US and elsewhere Nielsen and IRI and others have developed cost effective means to provide (at reasonable cost) sales, price and distribution, and in-store data on a weekly basis across the category.

Pitfalls of Marketing Mix Modeling outside of the US

Outside of the US and the major countries in Europe other factors come into play - in particular coverage and granularity.  In Russia, for example, data covers about 40% of the retail sales volume and is often concentrated in the major cities.  In addition, the data is available only on a monthly or even bi-monthly basis - making it nearly impossible for traditional, statistically based MMM's to provide hard and fast answers.

Using Agent-Based Modeling and Simulation

A new technique based on agent-based modeling, where agents represent virtual consumers, is now gaining momentum and is a viable alternative in these data-stressed countries and categories.  Because the agent-based modeling is based on consumer choice, even in the face of less than stellar data they can deliver robust results in order to improve a marketer's strategic and tactical decision-making. 

If you'd like to learn more give me a ring.  I'd love to hear from you.

Social Marketing Strategy Refined

As the social marketing space moves into the mainstream, we need to take a more sophisticated approach to our social marketing strategies and tactics.  The more sophisticated marketers are moving from a shotgun approach to a more targeted approach with more reliable success.  Below are some thoughts on two approaches in order to get the discussion going:  The shotgun approach and the targeted approach.  I am very curious to hear how you are developing your social marketing strategies and what you are doing to measure their success and apply that to improved future actions.

The shotgun approach

The shotgun approach basically looks at the market, takes a couple of stabs at it and sees what sticks.  This has worked (presumably) in the past because social marketing has generally been able to deliver a lot of value at a relatively low cost.  And as with most new frontiers, it’s often hard to fail even with a relatively weak or non-existent overarching strategy.  In a fast growing medium just about anything can succeed, delivering a great results and with some ongoing tweaking the shotgun approach can quickly coalesce into driving meaningful Marketing ROI.

The analytic approach

An analytical approach to successful targeting of social media looks at the target consumer segments for our physical product or service and builds a cross-section of the social media active segments to determine potential high value micro-segment opportunities.  This approach focuses on the following questions:

• What are the consumer segments we are currently targeting?
• What is our penetration in those segments?
• What is the competitive penetration each of these segments?
• Are there segments available that offer some real opportunity and where we offer a strong competitive value proposition?

These are pretty standard questions for any marketer, but how does this backdrop apply in the social media space?

Just as we have to target our traditional media buys, so too must we target our social marketing activities.  With social marketing activities, however, we are competing on a different plane.  In the traditional media space we are competing at the category level with physical products and services.  In the social media space we are competing in the entertainment space.  Our social marketing consumers are spending their valuable time, instead of their valuable money.  They could be playing a video game, watching TV or participating in another social media activity.  The social media activity could be for some other category or it could be with a competitive social media site. 

In order for our social marketing to be successful we need to provide a high entertainment value in order to generate interest and develop enthusiasts in addition to delivering lots of visitors.  Our offering has to compete on this new plane.  We need to target the specific segment active in the social media space with specific entertainment activities that will drive brand value in this entertainment oriented target segment.  Once we have been able to drive improved brand value we know that this can lead to improved conversion (due to the mechanics of choice – see http://marketingtactegy.typepad.com/blog/2007/06/ingredient_bran.html) at some point in the future. 

In essence we need to deliver a social media experience that competes with other social media and entertainment venues consumed by our target audience that can positively drive brand equity in the minds of our consumer segments.   It is an entertainment product that provides value to our target audience.  Just as we need to understand the competitive landscape and opportunities to successfully launch a new physical product (or service) so too, must we launch and deliver a social media activity as if it is a new entertainment product competing for time with our target audience.

In my next post I want to talk further about how we can improve our brand results through our social marketing by understanding these micro-segments and how our messages in the social space can be used to potentially drive the value of specific, high-value brand attributes that feed the consumer choice equation.

If you have any other thoughts on this, I would love to get your feedback.  If you would like a more detailed discussion on choice, please visit http://www.Marketing-Calculator.com.

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.