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Applying the science of measurement to the art of advertising - 6 may 2010 v.2

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Presentation to the 4A's Green Forum.

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Applying the science of measurement to the art of advertising - 6 may 2010 v.2

  1. 1. May 6, 2010 Ron Jacobs [email_address] Applying the Science of Measurement to the Art of Marketing A Presentation for
  2. 2. Agenda <ul><li>How to forge a connections between marketing activities and business outcomes </li></ul><ul><li>Explore marketing effectiveness using Return on Marketing Investment </li></ul><ul><li>Why establishing Key Performance Indicators is the starting point for measurable marketing </li></ul><ul><li>Explore attribution models for multichannel marketing communications </li></ul><ul><li>Describe social media marketing measurement </li></ul><ul><li>Identify attributes necessary for agency staffers that can make the transition to measurable marketing </li></ul>http://vimeo.com/10251808
  3. 3. Themes from the 4A’s Conference in March 2010 <ul><li>Communications’ objective is conversions </li></ul><ul><ul><li>Ad’s influence behavior </li></ul></ul><ul><ul><li>Brand stories good </li></ul></ul><ul><ul><li>Image & awareness… No! </li></ul></ul><ul><li>Add Calls to Action in copy </li></ul><ul><ul><li>How you get conversions </li></ul></ul><ul><ul><li>Buy key audiences rather than buying specific media </li></ul></ul><ul><ul><li>Use data for targeting & segmenting audiences </li></ul></ul><ul><li>Target geographically </li></ul><ul><ul><li>Local & hyperlocal </li></ul></ul><ul><li>Addressable media is here </li></ul><ul><ul><li>Personalize & customize communications, even TV </li></ul></ul><ul><ul><li>Adjust messages to channels </li></ul></ul><ul><li>Measurement & Accountability </li></ul><ul><ul><li>Bridges marketing & finance </li></ul></ul><ul><ul><li>Invest based on Customer Lifetime Value </li></ul></ul><ul><ul><li>Marketers, agencies, suppliers, talent, and media need new business models </li></ul></ul><ul><ul><li>Value based agency compensation </li></ul></ul>
  4. 4. Accountability. It’s not about what is measured, it’s about effectiveness and efficiency
  5. 5. The problem of the gold bar <ul><li>A worker will perform for seven straight days. </li></ul><ul><li>An employer agrees to pay 1/7th of a bar of gold per day. </li></ul><ul><li>What are the fewest number of cuts to the bar of gold that will allow the employer to make a payment of 1/7th of the bar each day? </li></ul>
  6. 6. The problem of the gold bar <ul><li>Day Worker Employer </li></ul><ul><li>Start 0 = 0 1/7 th + 2/7 th = 4/7 th = 7/7th </li></ul><ul><li>1/7 th = 1/7th 2/7 th + 4/7 th = 6/7 th </li></ul><ul><li>2/7 th = 2/7 th 1/7 th + 4/7 th = 5/7 th </li></ul><ul><li>2/7 th + 1/7 th = 3/7 th 4/7 th = 4/7 th </li></ul><ul><li>4/7 th = 4/7 th 1/7 th + 2/7 th = 3/7 th </li></ul><ul><li>4/7 th + 1/7 th = 5/7 th 2/7 th = 2/7 th </li></ul><ul><li>4/7 th + 2/7 th = 6/7 th 1/7 th = 1/7 th </li></ul><ul><li>1/7 th + 2/7 th + 4/7 th = 7/7 th 0 = 0 </li></ul>
  7. 7. The golden age of brand marketing
  8. 8. The current age… The Agency of today
  9. 9. Marketing accountability provides a framework for aligning marketing, finance and sales. Marketing Management Analytics/Association of National Advertisers survey: Nov. 2009 19% 33% 43% 70% 53%
  10. 10. Chief Marketing Officers top priorities in 2010
  11. 11. Top performance metrics 2010
  12. 12. Create a culture of marketing accountability <ul><li>Start with the basic foundation </li></ul><ul><ul><li>Measure, gain insight, optimize </li></ul></ul><ul><li>  Align metrics to objectives </li></ul><ul><ul><li>  Metrics need to support the organization’s business, marketing and communications objectives </li></ul></ul><ul><li>Use a few relevant metrics </li></ul><ul><ul><li>Don’t try to summarize in one overarching metric </li></ul></ul><ul><ul><li>And, don’t use every measurement you have </li></ul></ul><ul><li>  Track both financial and non-financial metrics </li></ul><ul><ul><li>ROMI is good. </li></ul></ul><ul><ul><li>Know the sources of marketing revenue & customers </li></ul></ul>
  13. 13. Lifetime Value helps marketers to direct customer marketing strategy <ul><li>What is Customer Lifetime Value (LTV)? </li></ul><ul><ul><li>The Net present value of the profit to be realized on the average new customer during a given number of years. </li></ul></ul><ul><ul><li>To compute LTV, you must be able to track customers from year to year. </li></ul></ul><ul><li>LTV used to assess acquisition & customer marketing strategies </li></ul><ul><ul><li>To best target sales and retention efforts, know the value of customers </li></ul></ul><ul><ul><li>LTV helps to determine how much a marketer can afford to acquire a new customer </li></ul></ul><ul><ul><li>LTV provides a way to segment during a customers lifecycle for up-sell, cross-sell, maintenance and retention of the most valuable customers </li></ul></ul><ul><li>LTV can also be a short-term metric of the long-term benefits of good (or bad) customer experiences.  (Peppers & Rogers) </li></ul><ul><ul><li>E.g. Any experience that improves the likelihood of future purchases </li></ul></ul><ul><ul><li>Increase/decrease in LTV represents the effect on value of an immediate experience </li></ul></ul>
  14. 14. Marketers (and Agencies) need to show accountability & effectiveness, not just measurement <ul><ul><li>Everything has a Key Performance Indicator (KPI), but cross-channel activity makes measurement and attribution harder </li></ul></ul><ul><ul><li>Relevance </li></ul></ul><ul><ul><ul><li>How marketing adds value to the business </li></ul></ul></ul><ul><ul><li>Alignment </li></ul></ul><ul><ul><ul><li>Proof that marketing is focused on the success of the business, not the size of its budget </li></ul></ul></ul><ul><ul><li>Rigor </li></ul></ul><ul><ul><ul><li>A fact-based, disciplined approach to strategy and execution </li></ul></ul></ul><ul><li>Without the above, Marketing gets The ROI Question </li></ul><ul><ul><li>This is Finance’s way of asking “Can Marketing be trusted to spend the company’s money wisely?”  </li></ul></ul>
  15. 15. Return on Marketing Investment – A measure of marketing effectiveness <ul><li>Input </li></ul><ul><li>Promotion Cost $1,000,000 </li></ul><ul><li>Average Sales $ 300 </li></ul><ul><li>Profit Margin 25% </li></ul><ul><li>Total Prospects 250,000 </li></ul><ul><li>Total Number of Sales 45,000 </li></ul><ul><li>Return on Marketing Investment (ROMI) </li></ul><ul><li>Total Revenue $1,350,000 </li></ul><ul><li>Total Profit $125,000 </li></ul><ul><li>Cost per Prospect $4.00 </li></ul><ul><li>Cost per Sale $22.22 </li></ul><ul><li>Conversion Percent 18% </li></ul><ul><li>ROI (?) 12.5% </li></ul><ul><li>ROMI Incremental Revenue $1.35 </li></ul><ul><li>ROMI Contribution Margin $ .125 </li></ul>
  16. 16. Key Performance Indicators (KPIs) can help measure everything <ul><li>1. Business contribution: </li></ul><ul><li>Channel reach, revenue contribution (direct and indirect), Return On Investment (or ROMI), category penetration, costs and profitability. </li></ul><ul><li>2. Marketing outcomes: </li></ul><ul><li>Customers, leads, sales, service contacts, conversion, retention, winback and response efficiencies. Acquisition cost, Avg. order, Avg. profit, Lifetime Value. </li></ul><ul><li>3. Customer satisfaction: </li></ul><ul><li>Usability, performance/availability, recommendation behavior. Opinions, attitudes, reasons for defection, brand impact and churn. </li></ul><ul><li>4. Customer behavior : </li></ul><ul><li>Profiles, customer orientation (segmentation), usability, clickstream and site actions. Bounce rates, conversions, page views, depth, page & site duration, RFM and transaction behavior. </li></ul><ul><li>5. Channel promotion: </li></ul><ul><li>Attraction efficiency. Referrer efficiency, cost of acquisition and reach. CPM Vs CPC. Search engine visibility and link building. Unique visitors, frequency, e-mail marketing results. Channel integration. </li></ul><ul><li>6. Social media: </li></ul><ul><li>Engagement (e.g. # of comments); involvement (e.g. time spent); bounce rate; # of reads, comments, & posts; brand affection/aversion; conversions; mention of brand name; advocacy; viral activity; referrals; recommendations; multiple moving averages; etc. </li></ul>1. Business contribution 2. Marketing outcomes 3. Customer satisfaction 4. Customer behavior 5. Channel promotion 6. Social Media <ul><li>KPIs distill analytics data into relevant information </li></ul><ul><li>Exclusive to each business </li></ul><ul><li>Specific </li></ul><ul><li>Valuable </li></ul><ul><li>Actionable </li></ul><ul><li>Focus on the 3 – 5 most significant metrics </li></ul>
  17. 17. Once you measure, optimize. Testing and attribution
  18. 18. Creativity & accountability are compatible <ul><li>cre·a·tive   (kr-tv) adj. </li></ul><ul><ul><li>Having the ability or power to create:  Human beings are creative animals. </li></ul></ul><ul><ul><li>Productive ; creating. </li></ul></ul><ul><ul><li>Characterized by originality and expressiveness; imaginative:  creative writing </li></ul></ul><ul><ul><li>n. One who displays productive originality:  the creatives in the advertising department </li></ul></ul><ul><li>Creatives love metrics. At least the ones I work with do! </li></ul><ul><ul><li>They don’t want to do ads/stories that have no objectives, no strategies, no grounding, no framework, no purpose </li></ul></ul><ul><ul><li>Creatives crave more information, more research, more data, more metrics </li></ul></ul>
  19. 19. Construct a test plan <ul><li>What are you testing </li></ul><ul><li>Why is it being tested </li></ul><ul><li>What audience segments are being tested </li></ul><ul><li>Describe the expectations for the test (e.g. Success, failure) </li></ul><ul><li>Identify the measures of success for the test </li></ul><ul><li>Are there risks associated with running the test </li></ul><ul><li>What are the internal resources required to run the test </li></ul><ul><li>Who are the stakeholders requesting the test </li></ul><ul><li>When are results needed? </li></ul>
  20. 20. Test Elements <ul><li>Headlines </li></ul><ul><li>Sub-headlines </li></ul><ul><li>Body copy </li></ul><ul><li>Offers </li></ul><ul><li>Calls to action </li></ul><ul><li>Images </li></ul><ul><li>Colors </li></ul><ul><li>Landing pages </li></ul><ul><li>Product attributes </li></ul><ul><li>Bounce rate </li></ul><ul><li>Lead Forms </li></ul><ul><li>Testimonials </li></ul><ul><li>Price </li></ul><ul><li>Bonus offers </li></ul><ul><li>Guarantees </li></ul><ul><li>Video </li></ul><ul><li>Audio </li></ul><ul><li>Fonts </li></ul>
  21. 21. Two types of web testing <ul><li>A/B testing (Split Testing) </li></ul><ul><ul><li>Compares the performance of two different pages </li></ul></ul><ul><ul><li>Good when a web site has fewer than 1,000 page views per week </li></ul></ul><ul><ul><li>Can help when moving sections around or changing the overall look of web pages </li></ul></ul><ul><li>Multivariate Testing </li></ul><ul><ul><li>Compares the performance of content variations in multiple locations on a page </li></ul></ul><ul><ul><li>Good when a web site receives more than 1,000 page views per week </li></ul></ul><ul><ul><li>Can help optimize multiple content changes in different parts of multiple web pages simultaneously </li></ul></ul>
  22. 22. A/B Split Testing Headline Image Offer Body Copy Test A Test B Headline Image Offer Body Copy Call to Action Call to Action Test one variable at a time
  23. 23. Multivariate Testing Headline 1 Image A Offer 1 Body Copy a Test A Test B Headline 2 Image B Offer 2 Body Copy b Call to Action I Call to Action II Test C Head line 3 Image C Offer 2 Body Copy c Call to Action III Test multiple variables at a time 3 6 Variables (3x3x3x3x3x3) = 729 Tests
  24. 24. Conversion optimization starts beyond the borders of your web site
  25. 25. Barriers to better attribution models include technology, resource, and process challenges <ul><li>Most current attribution models are flawed </li></ul><ul><ul><li>The last touch standard or current session models </li></ul></ul><ul><ul><li>Causes over-invest in near-term conversion drivers </li></ul></ul><ul><li>The consumption and impact of media is interrelated with other media </li></ul><ul><ul><li>Traditional media is interrelated with Digital media </li></ul></ul><ul><ul><li>The relationship between display and search changes depending on products, brands, time of day, season, company, geography, etc. </li></ul></ul><ul><li>The multichannel effect is important in high-consideration situations </li></ul><ul><ul><li>e.g. Expensive, complex or involved offerings </li></ul></ul><ul><ul><li>Financial services offerings, family vacation or a choice of college </li></ul></ul>
  26. 26. Last ad standard Atlas Solutions, Microsoft Advertising
  27. 27. Engagement Mapping across channels Atlas Solutions, Microsoft Advertising
  28. 28. Social Media Relevant measures are being tracked, analyzed and used for program optimization & ROMI
  30. 30. You Should Take Social Media Seriously <ul><ul><li>The amount of video uploaded to YouTube every minute </li></ul></ul><ul><ul><ul><li>20 hours </li></ul></ul></ul><ul><ul><li>The amount of time it would take to view every video on YouTube </li></ul></ul><ul><ul><ul><li>650 Years </li></ul></ul></ul><ul><ul><li>The number of YouTube videos viewed per day </li></ul></ul><ul><ul><ul><li>1 Billion </li></ul></ul></ul><ul><ul><li>The average number of tweets on Twitter.com every day </li></ul></ul><ul><ul><ul><li>50 Million </li></ul></ul></ul>
  31. 31. You Should Take Social Media Seriously <ul><ul><li>The number of photos archived on flickr.com as of June 2009 </li></ul></ul><ul><ul><li>13.6 Billion </li></ul></ul><ul><li>The amount of content (Links, news, posts, notes, photos, etc. shared on FaceBook weekly </li></ul><ul><ul><li>1 Billion </li></ul></ul><ul><li>The number of minutes spent on FaceBook daily </li></ul><ul><ul><li>8 Billon </li></ul></ul><ul><li>If FaceBook were a country </li></ul><ul><ul><li>It would be the 3 rd most populated in the world, behind China & India </li></ul></ul><ul><ul><li>The number of Articles on Wikipedia </li></ul></ul><ul><ul><ul><li>15 Million </li></ul></ul></ul>
  32. 32. CMO’s want social media measurement, but don’t do it Source: eMarketer.com
  33. 33. CMO’s are not tying results to objectives
  34. 34. Social Web Key Performance Indicators <ul><li>Scale </li></ul><ul><ul><li>Number of visitors, registrants, followers, fans, members, etc.; sources of traffic; quantity of comments about the brand, etc. </li></ul></ul><ul><li>Involvement </li></ul><ul><ul><li>Content downloads, readership, network/community numbers/quality, YouTube and flickr views, time spent, frequency, geography, etc. </li></ul></ul><ul><li>Engagement </li></ul><ul><ul><li>Actions they take: e.g. Conversions, read, posts, comment, reviews, recommendations, product rating scores, etc. </li></ul></ul><ul><li>Intimacy </li></ul><ul><ul><li>Affection or aversion to the brand (e.g. Positive Vs negative posts); community sentiments, opinions expressed, etc. </li></ul></ul><ul><li>Influence </li></ul><ul><ul><li>Advocacy, viral forwards, referrals and recommendations, social bookmarking, mentions outside of your community, etc. </li></ul></ul>
  35. 35. Five indicators of customer engagement <ul><li>Memorability </li></ul><ul><ul><li>Do they remember the communications and message </li></ul></ul><ul><li>Favorability </li></ul><ul><ul><li>Positive Sentiment Vs Negative sentiment </li></ul></ul><ul><li>Purchase Consideration </li></ul><ul><ul><li>More or less likely to purchase after exposure </li></ul></ul><ul><li>Time Spent </li></ul><ul><ul><li>Positive correlation between time spent and purchase consideration </li></ul></ul><ul><li>Cognitive and Emotional Response </li></ul><ul><ul><li>Understand and feel good about the messaging </li></ul></ul>
  36. 36. Alterian’s Social Engagement Index 2010 Super Bowl TV Ads www.alterian-social-media.com/
  37. 37. Alterian’s Social Sentiment Index 2010 Super Bowl TV Ads www.alterian-social-media.com/
  38. 38. How much is a tweet, a fan or a follower worth? www.alterian-social-media.com/
  39. 39. Staff needs to be a Swiss Army Knife <ul><li>Digital DNA (At least some) </li></ul><ul><li>Business savvy </li></ul><ul><li>Creative thinkers </li></ul><ul><li>Implementation skilled </li></ul><ul><li>Optimization focused </li></ul><ul><li>Analysis enthusiast </li></ul><ul><li>Planning confident </li></ul>
  40. 40. Conclusions <ul><li>Marketing accountability is among CMO’s top priorities for 2010 </li></ul><ul><li>Testing and optimizing ads provides a way to improve performance for online and offline ads </li></ul><ul><li>To prove marketing effectiveness, KPI’s must be aligned with organizational goals and have indisputable rigor </li></ul><ul><li>Attribution modeling is difficult, often flawed, but essential in a world of multichannel marketing communications </li></ul><ul><li>There are a growing number of measures for social marketing, if only marketers and agencies would use them </li></ul><ul><li>Staffers for tomorrow’s marketing communications will multidisciplinary, a veritable Swiss Army knife of capabilities </li></ul>
  41. 41. Questions & Answers Questions?
  42. 42. Thank You! [email_address]