The Home, Car, Store Digital Shopping Funnel

In a recent post, “Digitizing the 1^st Moment of Truth,” I wrote about the advent of UPC driven Smartphone apps that have the potential to radically change the point of sale shopping experience. This is really just part of a larger shift to a “Digital Shopping Funnel.”

Digital Purchase Funnel: Home-Car-Store Pathway

Today’s consumers live in a busy, sometime chaotic, world. For most consumer shoppers, their lives are connected by 3 important elements — the home, the car and the store. All three offer increasing digital opportunities for Marketers to communicate with and influence consumers.

The old purchase funnel was consumer mindset: awareness, knowledge, consideration, and purchase. The new Digital Purchase Funnel can be thought of as the series of digital interaction points along the journey from a consumer’s home to the store. How should Brands be thinking about this journey?

The Home-Car-Store Digital Journey

The Home – TV, of course, remains the dominant in-home screen and continues to grow in usage. 2009 TV usage in the U.S. was at an all time high of 35 hours per week. PC usage continues to be high at ~7 hours per week, but growth is leveling off. The most important in-home trend that bears watching is cross-platform media usage, particularly as the World Cup approaches.

New Nielsen data shows that almost 50% of consumers watch TV and are on-line concurrently at some point, and about 4% of total viewing time is simultaneous. Related, AOL research shows that 71% of consumers use their Smart Phones while watching TV.

TV & Mobile Usage: Simultaneous Viewing Trend

This means that consumers aren’t always paying attention to the TV shows they’re supposedly watching. Ever try watching an episode of “Lost” while surfing the web? If you have, then you know that you miss a lot because you’re not as involved as you could be. Involvement in a show becomes more critical than ever (see my blog post: “Why Your Brand Should Understand TV Program Engagement”).

Further, if I know that many consumers in my target audience watch “Lost” and use Facebook at the same time, perhaps I should be doing cross-platform advertising and other marketing for “Lost” and Facebook. This kind of simultaneous advertising and social media exposure across TV-Web-Mobile will become more important in the future.

Cross-Platform Program Viewing Grows

The other in-home trend to watch is on-line video. In 2009, on-line video usage increased +41%. More importantly, Nielsen IAG research shows that the same ads as on-line video are more effective than traditional network TV ads, all things equal. And, the combination of traditional TV ads and on-line video ads are more effective than either individually. All of this means that understanding cross-platform viewing and ad impact is more important than ever.

The Car – The average driver spends about 2.5 hours per day in their car, according to Arbitron. This is 2.5 hours of time that’s about to change rapidly with the advent of in-car digital media. Long the domain of radio and music, the car is perhaps the last frontier in digital mobile content. Ford recently announced that they’ve now sold 2M cars with Sync, and GM’s On-Star is now in 6M cars. What can we expect in the way-station to the store in the future?

What we can expect is car based wi-fi, web connectivity via the driver’s cell phone, mobile apps designed for car usage, and even in-car mobile TV. Of course, most of these applications will be either voice-activated by the driver, or used by passengers for safety reasons.

For Passenger Use: In Car Wi-Fi

Google is already operating in this space with its Android 2.0 upgrade, which includes a voice activated Google Maps application. Marketers are largely absent in-car at present other than radio, but the potential to deliver in-car communications, offers and other content via new digital connections is huge and largely untapped. And even radio is innovating, with Turner network offering contextual based advertising (see “Contextual Advertising: Moving Beyond the Web”).

The Store — Once in store, consumers will be able to use numerous UPC driven apps to evaluate products on price, performance, social responsibility and other important criteria. Consumers will be smarter and more informed at point of sale than ever before.

Increasingly, retailers will use their “4^th Screen” out of home digital networks to advertise and promote brands in store. Current in-store networks have already demonstrated the ability to drive significant consumption increases of brands in exposed vs. non-exposed comparisons.

In-Store Digital Networks: Important Part of the Digital Purchase Funnel

Finally, shopper marketing, including couponing, will become increasingly digital and activated by geo-location, and past shopper behavior will inform predictive analytics that will suggest products (such as, “consumers like you also bought…”), offers and other specials.

Stitching The Pieces Together

This new Digital Purchase Funnel – from home to car to store – is quickly becoming a reality. Almost all of the pieces are in-place or under development.

What’s fuzzy at the moment is how brands will stitch these home-car-store touch points together in a seamless consumer experience to maximize impact:

• What advertising combinations across these 3 points will be most impactful?
• Which messages will be most effective?
• Where can brands add the most value thru content specific apps?
• Where along the home-car-store axis do consumers want to engage or converse with brands?
• How will brands measure impact?

Our knowledge of these kinds of effects is virtually non-existent. But in the future, brands will need to answer these types of questions to engage consumers along this important Digital Purchase Funnel to win at the critical 1^st moment of truth – the store shelf.

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What Happens When Your TV Goes Wireless

In case you haven’t noticed, TV’s are going wireless. According to research from the Leichtman Research Group, 24% of all households have a TV connected to the internet. What does this mean for advertisers?

All Wireless Connections are Not The Same

Users differ in how they’re wirelessly connected. Some are connected thru a video game system, some a Blu-Ray player, and others are connected directly thru the TV set itself. In fact, some firms are projecting 40% household penetration by 2013.

Consumers Connect: Wireless Enabled TV

Are Consumers Disconnecting?

According to the same Leichtman research, 11% of adults watch a full length TV show on-line weekly. But surprisingly, very few consumers (4%) say they are likely to disconnect their TV service to watch TV only on-line.

This is supported by broadband service penetration level trends; the top 19 service providers added over +4 million subscribers last year. So, don’t expect a wireless revolution against the carriers anytime soon.

Barriers to Adoption of Wireless TV

Some analysts are skeptical about the growth potential for Wireless TV. For example, Carl Howe of Yankee Group says:

“Somebody needs to work really, really hard on creating a very easy-to-understand and easy-to-use interface that not only the technically savvy could use, but also your grandmother could use.”

And a few players are making efforts to address viewer usability. For example, Verizon FIOS offers widgets for traffic, weather, and sports scores via their ”Widget Bazaar” store. More recently, they’ve opened the platform to 3rd-party developers and Facebook and Twitter apps have appeared. And you can bet more creative, user-friendly apps are on the way.

Verizon Fios' Facebook & Twitter Widgets Encourage Engagement

Another issue is content rights. Web operators or service providers will need to acquire the content rights for these services. There is already a legal framework in place that will support this, but it will require both time and money.

Finally, there’s bandwidth–or the lack thereof. Some people, such as Larry Hettick, an analyst at Current Analysis, have argued that the current service providers simply don’t have the capacity for millions of simultaneous users of on-line video:

“[Cable companies] didn’t build their connections with the capacity to download a huge amount of HD videos at one time…. If everybody starts to do that, the cable Internet connections will melt down.”

All of these issues are real, but they’re also solvable with enough time and money. We should assume that they will be.

Wireless TV — Potential Changes in Consumer Behavior & Advertising

As TV’s become increasingly wireless, I see at least five broad-scale implications:

1.  Consumer usage of on-line video will accelerate. As noted above, about 1 in 10 consumers already watch video on-line on a weekly basis. The expansion of on-line video to large screen wireless TV’s will accelerate growth.

Consumers want to watch content on the best screen available–and a large, high quality TV beats a PC, all things equal. So, enabling on-line video on the best home screen–the TV–will equal more on-line video consumption.

Content is King on Wireless Enabled TV

2.  Consumers will increasingly control how and when they consume TV. With wireless TV, consumers will have even more control of what and when they watch. They will increasingly browse video content for viewing on their own schedule, and traditional ads will be at risk.

It’s increasingly clear that consumers value on-demand video more than Linear TV, except for a select few programming niches like sports and news where live broadcast makes a difference. So, the balance will shift from big Linear TV/small on-demand to big on-demand/small Linear TV over time.

Sports Programming & Linear TV

Simply put, wireless will continue the trend of making it easier and simpler to watch the content you want, when you want it, and on the best screen possible.

3.  The on-line video advertising load will increasingly resemble Linear TV. As I wrote in a previous post, “Linear TV versus On-Line Video Advertising – Which is More Effective?”, we know that the same ads in on-line video beat Linear TV ads across almost every ad effectiveness metric. This is because of both higher engagement programming and less clutter on-line.

Wireless TV will likely erode these advantages. The program engagement advantage is due in part to the “lean forward” 1:1 consumption of PC based content–which will disappear when people are in a “lean back” viewing mode with their TV. As well, on-line video’s lower ad clutter advantage will likely decrease as service providers like Hulu improve their economic model with more ads. Most experts agree that on-line video economic viability requires some combination of ad supported revenue with higher ad loads + subscriber fees.

4.  New ad formats will become more important. Wireless TV makes it easier for consumers to consume content when and how they want, which will continue to make it easier for consumers to skip ads. As well, it’s likely that content models will emerge which are a combination of subscription and ad supported. For the subscription content, it’s possible that there will little or no traditional ads, while ad supported content will carry Linear TV like ad loads.

In any case, this means that “hybrid” ads which bridge program content and commercial ads, along with in program product placement, are likely to become more important.

5.  Advertising effectiveness measurement will need to account for Content Form Factors. In the future, there will be a myriad of ways to view the same program: via Linear TV, On-line PC, On-line via wireless TV, by Smartphone, etc.

Each of these content form factors will impact ad effectiveness. Advertisers need to know how their ads perform across these different forms (i.e. is my ad in “Lost” on Linear TV more or less effective than on wireless enabled web viewing on TV, etc.) and also how various combinations perform.

Implications

All of this points to an inexorable trend–advertising is going to get a lot more complex in the future, not less. The broader implication is that this increased complexity–driven in part by wireless TV–will require CMO’s to develop far more sophisticated approaches that require advanced algorithms, quantitative skills, and organizational savvy that doesn’t exist in most Marketing organizations today.

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Linear TV vs. On-Line Video Advertising — Which is More Effective?

Did You Know That:

• On-line video ad spending grew +41% in 2009 — even during a down advertising year?
• 72% of all internet users in the U.S. viewed on-line video last year?
• More U.S. consumers watch video on the web than watch recorded TV on DVR’s?

All of this adds up to something very interesting: On-Line Video advertising is growing like a weed. Which raises another question: how does On-Line Video advertising work versus Linear TV advertising? 

On-Line Video Ads -- How Do They Compare to Linear TV Ads ?

My colleague David Kaplan of Nielsen IAG (disclosure: I work for Nielsen) partnered with Beth Uyenco, Global Research Director from Microsoft, to compare the effectiveness of Linear TV advertising and On-Line Video advertising in a recent presentation to the Advertising Research Foundation (ARF). 

Research Approach — What Was Measured

Kaplan and Uyenco used Nielsen IAG’s U.S. on-line panel to measure TV and web video advertising data from November 2007 to May 2009, across 238 brands, 412 products, and 951 advertising executions.  For each ad, they measured the same effectiveness metrics: general recall, brand recall, message recall and likeability. Key measurement metrics were identical across the two mediums. 

On-Line Video Advertising -- Why Is It More Effective ?

Key Learnings — Linear TV vs. On-Line Video

1.  On-Line Video Outperformed Linear TV — Remember that this was an “apples-to-apples” comparison which compared the exact same creative execution across the two mediums. On-Line Video scored higher than Linear TV ads, on average, for: 

• General Recall:        65% vs. 46%
• Brand Recall:           50% vs. 28%
• Message Recall:      39% vs. 21%
• Likeability:               26% vs. 14%

2.  The On-Line Video Advantage was Largest Among 13-24 year olds — Among younger consumers, On-Line Video outperformed Linear TV advertising by greater than 2 to 1. On-Line Video’s advantage cut across all age groups, but was smallest among  50+ year olds. 

3.  Re-purposed TV Ads Outperformed Web Original and Flash Animation Ads — This was one of the most interesting learnings of the study. Even when controlling for prior TV ad exposure, a re-purposed TV ad shown on web video performed better than ads created specifically for the web. What does this say about Marketers understanding of digital creative ? 

4.  Linear TV + Web Video Ads are More Effective Than Linear TV Alone — Consumers exposed to ads in both mediums had higher general recall, brand recall, message recall and likeability than consumers exposed to TV alone. Once again, the data clearly shows the advantage of a cross-platform, integrated marketing approach. 

Why Is On-Line Video More Effective ?

There are a number of reasons which could explain On-Line Video ad superiority: 

• Higher Program Engagement – As I’ve discussed in a previous blog post, Why Your Brand Should Understand TV Program Engagement, research shows that the more engaged consumers are in a program, the more likely they are to remember the ads in the program. Nielsen IAG research shows that on-line video program engagement is +13% higher than the broadcast TV primetime norm. So, this higher engagement naturally drives higher ad recall.
• Inability to Skip Advertising – If you’ve watched any On-Line Video, you know that you can’t easily skip the ads. I think the impact of DVR ad skipping on ads is over-rated, but the lack of DVR like ad skipping has to benefit On-Line Video ads.
• Reduced Ad Clutter — On-Line Video has about 1/2 the ads per hour than regular network TV. Various research studies over the years have shown that there is a small, but significant, impact of clutter on advertising effectiveness.
• Presence of Companion Ads — On-Line Video ads are more likely to have companion ads in the same program. The presence of companion ads increases ad effectiveness versus a single exposure alone. However, even when they controlled for a single ad exposure, On-Line Video still significantly outperformed Linear TV.

Now, before you think about running out and building your next campaign around On-Line Video, consider this: the average consumer spends only2% of the time viewing web video as they do TV. The practical implication of this is that most brands can’t deliver a high reach media plan with web video alone. 

But the facts remain: On-Line Video ads are more effective than Linear TV ads, especially among 13-24 year olds. As well, On-Line Video ads work synergistically with TV, and perhaps best of all, TV ads can be re-purposed on-line and actually score better than creative that’s been created specifically for the on-line medium. 

Can It Last ?

Some of the factors contributing to On-Line Video’s advantage, such as higher program engagement scores, are unlikely to change anytime soon. But others, like reduced ad clutter, will probably erode over time. Content providers are not making much money with their content on-line, and some are experimenting with more ads per hour. So, any advantage due to less clutter is likely to be short-lived. 

Nonetheless, with it’s higher performance versus Linear TV and spectacular growth rates, I think it’s only a matter of time On-Line Video ads become a signficant part of every smart CMO’s marketing mix. 

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Learning From the Dynamics of Viral Marketing

In what context do viral marketing strategies work? How do on-line product recommendations develop, multiply, spread and ultimately, dwindle and die? And, can Marketers influence any of this?  

These were important questions posed by Leskovec, Adamic, and Huberman in their 2008 study “The Dynamics of Viral Marketing.” This is one of the few studies I’ve seen to actually study how on-line recommendations grow virally and how this growth impacts purchase behavior throughout the viral network.  

Viral Marketing -- When and Where Does it Work?

 

Admittedly, the study had limitations, notably that it was only four categories, just measured on-line viral activity, and included a discount incentive to help motivate purchase. But, even with these limitations, it uncovered deeper insights into the systematic patterns in knowledge sharing and persuasion online—all of which are of high interest to Marketers.  

What Did the Study Entail?

Lescovec et al. examined an online recommendation network composed of 4 million people who made 16 million recommendations for 0.5 million products. Each time a consumer purchased a book, music, or movie, he or she could  send e-mails recommending the item to friends. The first person to purchase the same item through a referral link received a 10% discount.  

What was Measured

• When and at what price a product was purchased
• If the product was recommended to others
• Whether the recommendation resulted in a subsequent purchase and discount

They then modeled the effectiveness of recommendations as a function of the total number of previously exchanged recommendations.  

Recommendation Networks Grow Slowly Over Time.

 

Important Viral Network Learnings & Insights

Finding #1:  Consumers recommended a large number of products to the same group of people. As a result, recommendation networks became heavily locally-based. For example, in the DVD recommendation network there are 182,000 pairs that exchanged more than 10 recommendations.  

Consumers Tend to Recommend Products to the Same People

 

Finding #2: Recommendation networks centered on a specific product category. That is, the people tended to focus on recommending a particular product category and thus created a “community of interest.” Having said this, most all networks shared recommendations for all types of products.  

Finding #3: Trust, influence, and perception of “spam” affected purchase. As people exchanged more recommendations, the likelihood they would purchase the product increased due to a growing foundation of trust. However, purchase likelihood increased, peaked, and then fell as consumers received additional recommendations for a specific product. A few recommendations built credibility; too many appeared as “spam.”  

Finding #4:  Most recommendation chains didn’t grow very large. In fact, most terminated with the initial product purchase, and even the largest connected networks were very small as a percentage of the total population.  

Recommendation Chains Don’t Typically Grow Very Large

 

Finding #5: 20% of recommendations accounted for 50% of sales. This is not far from the usual 80-20 rule, where the top 20% of products account for 80% of sales.  

What are the ‘Viral’ Implications for Marketers?

1. Identify the “Amplifiers.” Given that 20% of recommendations generate 50% of sales, it’s key to figure out whom the amplifiers are and focus your efforts on them.  

2. Determine Where the “Amplifiers” Congregate. Where do they exchange product information? On what platforms do they consume media? Web behavior can be linked to off-line purchase panels to quantify the effectiveness of recommendations (see “What Really Drives Web Advertising ROI”).  

3. Take Online Recommendation Networks to the next level Through Social Media Marketing. Marketers should explore development of models to measure recommendation systems on Twitter, Facebook, Foursquare, and the larger online arena. Through broader web 2.0 outreach, marketers can quantify consumer engagement on recommendation networks by volume, reach, tone, and source.  

Marketers can optimize paid media and earned media with viral marketing.

 

4. Be Wary of Creating “Recommendation-Fatigue.” A fine line exists between trust and influence in recommending a product and what is widely considered “spam.” Consumer engagement via any online channel must be done with careful consideration of earned media and buzz promotion.  

Viral Marketing: Limitations…

What’s not yet so clear from the research is how to minimize transmission “breakdown” – e.g. how do you minimize the likelihood that a product recommendation is the last one. As the research showed, most viral networks don’t grow very large. Marketers will only invest significant money if they can truly scale viral marketing programs.  

…And Future Opportunities

With the right tools and metrics, marketers can diversify their marketing plans to incorporate viral marketing strategies. The research clearly shows that viral marketing can build unique and niche recommendation networks, bolster consumer engagement, and lift sales.  

And as consumers continue to favor a digitally-based, social network-centric world, it’s critical that Marketers become more expert at viral marketing. Key to this will be identifying amplifiers, focusing on congregation points, leveraging social media opportunities—all without overdoing it. As importantly, Marketers must discover new approaches to spread and scale viral marketing just as effectively as the flu seems to proliferate every flu season.  

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The Future of Marketing & Me

This month, I started a new role with Nielsen IAG as Global EVP/GM for the Consumer Packaged Goods sector. IAG measures program and marketing engagement across the 3 screens (TV, Web, Mobile) in real time to help Marketers optimize their Marketing effectiveness and business impact. This role affords me the unique opportunity to sit at the forefront of the revolution that’s washing over the Marketing landscape, by working with CMO’s of major CPG companies to understand what Marketing really works and what doesn’t in TV, web, in-program product placement and cross-media in this new, complex and highly challenging world.

The Nielsen Company

A sampling of the topics I’ll be focused on include:

• Media Selection – How does selecting the right TV programs improve ad recall?
• Ad Optimization – What is the optimal creative unit mix, copy length, wear-out, and rotation?
• Program Environment– To what extent does the program environment drive ad effectiveness?
• In Program Product Placement – How should Marketers evaluate product placement?
• Cross Media Performance – What are the cross-media effects of ads?
• Digital  & Social Media – How does advertising work in new media and in interaction with TV?
• Real Time Impact – How do Marketers monitor ad performance in real time and adjust on the fly?

Blog Themes — Transformation & Impact

If you’re read any of my blog posts over the past few months, you’ve probably recognized at least two major themes:

• The Transformed Marketing Landscape — We’re living through a transformational period in Marketing, the likes of which hasn’t been seen since the rise of TV and mass marketing. This change is driven by the fragmentation of media, increasing digitization of marketing, rise of social media, increasing importance of word of mouth from our social networks, and measurement tool innovation, among others. In short, Marketing has become a real-time, highly complex, more measurable, and conversational endeavor.
• The Need to Demonstrate Real Marketing Impact — Marketing should build brand image, increase customer satisfaction, and deliver improved top and bottom line business results. Marketers were already challenged to show real value for their spending before the changes outlined above; their ability to deliver results in this environment is even more challenging. This means that, more than ever before, they need partners who can bring sophisticated measurement and analytical tools to bear on their most pressing challenges and leadership thinking as to what this means for the Marketing function.

The crushing economic crisis of the past 18 months has, in my mind, only accelerated the need for the Marketing function to become more transparent and accountable for real business results. CEO’s, CFO’s and shareholders are demanding it, either directly or indirectly.

How My New Role Impacts This Blog

1. The CMO Perspective – I’ve written this blog from the point of view of a CMO. This perspective will continue, and in fact, will be enhanced as I meet and work with CMO’s from major CPG companies around the world. These conversations will enable me to bring an insiders view of the major issues and challenges facing Marketing organizations in this changing Marketing landscape, and share these perspectives as appropriate.
2. The Marketing Effectiveness Perspective – The new role provides a unique vantage point: the ability to look across CPG companies, brands and geographies to understand what works and what doesn’t. I want to have more and deeper insight into what Marketing really drives business results than anyone else in this space.  This will allow me to provide new perspective and insight, while still respecting client confidentiality.

Going Forward

I’ll continue to write about important Marketing topics — both ones which benefit from my Nielsen perspective and those which don’t. This blog won’t be an ad for Nielsen or a thinly disguised vendor white paper. But it will frequently draw on Nielsen data to make what I think are important points about Marketing. And while it should go without saying, it most certainly won’t ever compromise the confidentiality of any client which does business with Nielsen.

Thanks for your support and readership. Keep the comments coming. I look forward to continuing to write about Marketing topics that are at the forefront of the Marketing transformation that is enveloping us and most importantly, how Marketing can build brand equity, customer satisfaction and revenue and profit.

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