How Brands Grow – Blowing Up Marketing Shibboleths

January 3, 2014

How Brands Grow by Dr. Byron Sharp

If you’ve never read it, you should. Dr. Sharp, from the Ehrenberg Institute of Marketing Science, takes aim at many well established marketing beliefs and systematically demonstrates with data that they are often much overblown hype. If you’re a real Marketer, you owe it to yourself to read this book.

I particularly like his concepts of “mental and physical availability” as the most important drivers of brand growth. Advertising’s role is to create greater mental availability, and this is why real world “breakthrough” and memorability are such crucial gatekeeper metrics to advertising success.

I wrote a blog post book review on How Brands Grow some months back, but I recommend you read the book.

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The 5 Truths of TV Advertising Effectiveness

January 18, 2010

Question:  Is TV advertising less effective today than 15 years ago?

If you think you know the answer, read on. Digital and social media are having a transformational effect on Marketing content, organizations and processes. This being said, what’s often ignored is what we know about TV advertising effectiveness in the here and now. 

The 5 TV Advertising Truths

I recently wrote about “The 5 Myths of TV Viewership,” and this post forms a book-end with that earlier one. Like TV viewership, there are many myths about how and whether TV advertising actually works in the current environment. Here are the 5 most prevalent ones–some of which you might find surprising:
MYTH:   TV Advertising Takes a Long Time to Work
TRUTH #1:   Advertising Works Fast, When it Works

Part of the mythology of TV advertising is the “3+” frequency myth. That is, it takes a minimum of 3 repetitions of an ad for it to move a consumer down the purchase funnel. For CPG, this is simply not true. 

The advertising response curve is "convex"—the greatest marginal response is from the first exposures.

Numerous single source tests have demonstrated that when TV ads work, they work quickly to build sales (Rubinson, Journal of Advertising Research).  In fact, the TV ad effectiveness curve is generally convex—e.g. early airings have the most impact, and additional airings decrease in effectiveness (Taylor, Kennedy & Sharp: Journal of Advertising Research). When ads work, they tend to work quickly. 

MYTH:  When TV Ads Work, They Have Large Impact
TRUTH #2:  Ads Generate Small Impact Over Time

The question “What sales impact is my ad having?” has been studied rigorously since the advent of single source data (e.g. BehaviorScan or other panels which track the single variable impact of advertising on purchase behavior). On average, for the CPG categories studied, every $1 invested returns about $.10 (Taylor, Kennedy & Sharp Journal of Advertising Research). The sales return on an invested TV ad dollar has varied between .06 and .14 over the past 20 years (Hu, Lodish, Krieger & Hayati Journal of Advertising Research). And the sales lift is larger in year 2 than year 1. 

MYTH:  DVR’s are Killing Ads
TRUTH #3:  Ad Impact is Similar With or Without DVR’s

Yes, it’s hard to believe, but the evidence suggests that DVR homes have about the same recall of TV ads as non-DVR homes (du Plessis, Journal of Advertising Research). 

 

There’s likely a range of reasons for this phenomenon, including people with DVR’s watching higher engagement shows, DVR’s increasing total TV viewing time, etc. Interestingly, research shows that consumers have the same recall and understanding of your ad when fast forwarded as when viewed in a normal manner, if they have already seen it normally once (du Plessis, Journal of Advertising Research).   

MYTH:  Digital Ads are More Likable Than TV Ads
TRUTH #4:  TV Advertising is More Likable

People assume that because the web is a “lean-forward” medium, ads in this environment are naturally more engaging  and well liked. Research shows that this is not the case. On average, TV ads are liked better than digital ads (Moult & Smith, Journal of Advertising Research). Here I should also say that likability doesn’t necessarily translate to effectiveness. 

MYTH:  TV Ads are Declining in Effectiveness
TRUTH #5:  TV Ads are as Effective Today as 15 Years Ago

This is perhaps the biggest myth of all—that TV ads are losing effectiveness over time. Falling TV ratings and the rise of social media and mobile are hurting TV ad effectiveness, right? Wrong. The research on this topic, across time and geographies, strongly suggests this is not true. As noted earlier, advertising demand elasticities have fluctuated over the past 15 years, but are not declining (Rubinson, Journal of Advertising Research). So, TV advertising is as effective (or ineffective) as ever. 

Future of TV Advertising

So, if TV advertising is still effective, what’s the future of TV advertising? I’d suggest it will be in three areas: 

1. Cross Media – The rise of digital and social media has created numerous new means and forms to advertise and engage consumers. Research clearly shows that the impact of a TV ad is even higher when a consumer has been exposed to your brands ad on the web, and vice versa. Thus, CMO’s should focus on building cross media campaigns that continue to leverage TV as appropriate, but in new combinations with new social media and digital initiatives (for more on social media marketing, see “How the Future Social Web will Transform Marketing”). 

Social media has entered the traditional marketing ecosystem.

2. New TV Ad Forms – As TV evolves from network to networked TV, new advertising form factors are cropping up. iTV is already in place and many brands are experimenting with this new approach. Additionally, Shelly Palmer and others have proposed new ad forms such as speed bumps, telescoping ads, etc. which are being enabled by “networked” TV. Marketers need to keep an eye on these new ad forms and be ready to experiment, learn and adjust. 

3. Earned Media – There is vast opportunity for brands to understand how to use paid media to drive earned media. However, this is a nascent and poorly understood area that deserves much greater experimentation. Nonetheless, understanding how paid media drives earned, earned drives paid, and how they influence one another is fertile ground for future advertising model innovation. 

So, back to our original question: “Is TV advertising less effective than 15 years ago?” The answer is a clear “no,” just as you should answer the question “Shouldn’t we completely forget about TV advertising and just concentrate solely on new media?” 

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Coke CEO Muhtar Kent: What 1B Future Middle Class Consumers Can Teach Marketers

December 21, 2009

What can 1 billion future middle class consumers teach Marketers? Muhtar Kent, the Coca-Cola CEO, thinks he knows the answer. It’s about investing in your brand — in good times and bad.  

At the recent AdCouncil annual dinner, I had the privilege of hearing Mr. Kent accept the annual Public Service Award. You may know the AdCouncil as the organization behind such famous Public Service Announcement (PSA) campaigns as, Smokey the Bear and “Only You Can Prevent Forest Fires;” and  The United Negro College Fund’s “A Mind is a Terrible Thing to Waste;” etc.  

Muhtar Kent -- Marketing Investments in Tough Times Pay Big Dividends

Beyond imploring the audience to continue its support of the AdCouncil, which was the obvious topic, Mr. Kent devoted his speech to making an impassioned plea to those present — Marketers, Ad Agencies, and the Media — about what Marketers should do during a recession.  

Learning from the Great Recession

The key learning? Well, it’s not about value marketing, it’s not about more predictive models, and it’s not about being more price competitive. It’s something more basic, but also more challenging for Marketers to do — invest. In Marketing. In brand building. Even when the market is bad. Really bad.  

Mr. Kent’s point was more than a brand plea–it was an economic one:  globally, 1 billion consumers will move into the middle class in the next 10 years. Let me say it differently: these are your future consumers and your future revenue stream–and they can’t afford your brand today. But that’s going to change.  

Brand Choice: Yours or Someone Else’s?

And when it does, they’ll be making a choice: your brand or someone else’s. The critical point is this: today, these 1B consumers probably don’t know your brand, its benefits, and why they should consider buying it in the future. Advertising and Marketing have a critical role to play in engaging these future consumers with your brand now, so that when they have the wherewithal to buy your brand in the future, they will.  

Increasing marketing spend boosts long-term ROI, even during recessionary times.

Investing in Marketing during a recession is tough. Challenging economic times scare everyone — CMO’s included. So, what’s the standard CMO response? Cut spending. Invest less. Economize wherever possible. I know, I’ve been an unfortunate actor in these kinds of plays before.  

Why Invest When Times Are Tough?

There’s now a sizable body of research which empirically proves that companies which invest in Marketing during downturns tend to outperform their competitors coming out of the downturn. What’s the evidence?  

  1. Advertising in Downturns Yields Better Financial Performance — John Quelch, a professor at the Harvard Business School, conducted a study which compared companies which followed one of two strategies–investing in Marketing or cutting back. Results showed a consistent pattern of superior performance for the companies which invested during tough times. Guest blogger Susan Kanefield Lauinger highlighted Quelch’s research and the temptation to make quick cuts in marketing dollars.
  2. Advertising in Downturns Builds Confidence — Nielsen IAG reviewed financial companies which invested in advertising during the recent economic crisis versus those which didn’t (Disclosure: I work for The Nielsen Company). The key learning? Firms which invested had higher confidence in them than those which didn’t.

It is more important than ever for financial institutions to build confidence among consumers.

But How To Do It ?

Fine you may say, but how do you continue investing in Marketing when sales are falling, revenue is down, and Wall Street continues to have high expectations for your quarterly profit? What’s a CMO to do?  

  • Educate Senior Management — The CMO has to educate the CEO and CFO so they understand and really believe that Marketing is an investment and not just another cost item. Show them the research cited above, walk them through case studies, and even find examples within your own company of where downturn Marketing has made a difference. Educating your C-Suite about the proper role and impact of Marketing is an on-going responsibility (read more in my post “What Do CEO’s Really Want From Marketing?”)
  • Drive Financial Accountability in Marketing — CMO’s must be committed to being accountable for the money they spend. The more the Marketing function can demonstrate that it spends money wisely and generates positive return of Marketing investment, the more likely CEO’s and CFO’s will support investments during a downturn. The CMO’s job is to demand financial and brand building accountability of the Marketing organization.

Courage is never in more short supply than when a CMO proposes to invest more when times are tough. But investing in a recession is a proven way to gain advantage versus competition. Whether you can get the money you need in the next downturn depends entirely on educating the C-Suite and being accountable for good financial results behind your Marketing initiatives.  

It’s really that simple. So simple, in fact, that 1 billion emerging middle class consumers already know this:  invest in your brand in good times and bad–or risk having them buy your competitor instead.  

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What Really Drives Web Advertising ROI

December 14, 2009

The old adage “When you only have a hammer, everything looks like a nail” could certainly apply to web advertising. Like a hammer, click thru rate (CTR) has been the core metric used by many Marketers to measure web ad effectiveness since the early days of the web.

Does Click Through Rate Predict Sales Lift?

But with growing evidence that CTR is not the “hammer” of web effectiveness it was once deemed, marketers are learning that  no metric may be more meaningful than a poor one.

What Marketers Should Be Measuring

Marketers should be measuring brand building and business outcomes. Growing brand equity and consumer engagement, along with volume and share, should be at the top of the priority list for every CMO. Ultimately, these need to be translated into a return on Marketing investment (ROMI) measure, just like any other investment.

But because it has been so hard to measure these things, even on the web, Marketers have often settled for what they thought was the next best thing—in this case, CTR. And what made CTR particularly appealing was that it measured a consumer action. What could be better than that ?

The Real Impact of Web Advertising

Improvements in measuring and monitoring consumers web activities, coupled with off-line purchase panel data, now gives us insight into what really works.

How can web advertising ROI really be measured ?

  • Web Behavior – Consumers are provided software which, when downloaded, monitors and provides a comprehensive view of their web behavior (consumers opt-in and understand this when they agree to use the software).
  • Off-Line Purchase Behavior – These consumers also participate in an off-line purchase panel. They shop as they normally would shop. Once home, they scan their purchases into a purchase panel database using a handheld wand.
  • Fused Data – The web behavior and off-line purchase panel data sets are then fused together so that the they can be analyzed to determine cause and effect relationships.
  • Test vs. Control Analysis – Ancova (analysis of co-variance) analysis is then performed on the test (those consumers seeing an ad) vs. control (those not seeing one) to determine the single variable impact of the advertising.

So what does the data tell us?  Nielsen reviewed 28 CPG campaigns using the above methodology (disclosure: I work for The Nielsen Company). Surprise: there is virtually no relationship between CTR’s and volume growth (correlation < .10). What is clear is that campaign reach had a significant impact on likelihood for success: higher reach campaigns were more likely to drive business growth than lower reach campaigns.

Click Through Rates - Not Predictive of Sales

Learnings for Marketers

CTR is not a good metric in predicting business growth for web advertising. Additionally, it’s clear that Marketers should put more emphasis on developing and running campaigns with broad reach, as campaigns with higher reach tended to deliver higher ROI’s.  And while the data says nothing about the creative itself, you have to believe that the primary driver of business results is the quality of the value proposition and creative– is it special, different and better ?

There’s another important learning here though. In the quest for bringing greater accountability to the Marketing function—a laudable goal—Marketers also need to be careful not to adopt metrics for the sake of having metrics. As the data above shows, even consumer behavior based metrics may not be meaningful.

Which brings us back to the original point. The CMO’s job is to build the brand and the business, and not just to hammer a bunch of nails. 

So what’s in your brand’s tool kit?

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Zapped by Zappos – Learnings from CEO as CMO Tony Hsieh

November 9, 2009

The best CMO is a CEO who believes in Marketing. By this definition, Tony Hsieh, CEO of Zappos.com, must be one of the best CMO’s around. Hsieh, known for his firm’s digital and social networking prowess, had over 870k Twitter followers the last time I checked. I recently talked with Tony after he participated in a “What’s Your Digital?” panel discussion. And what he had to say might surprise you.

TonyHsieh

Tony Hsieh -- The Zappos CEO as CMO

Zapped by Zappos

Before that, however, let me tell you about my own Zappos experience—which is instructive. Seeking a pair of dress shoes for my new job, I went on-line to Zappos, and saw a great pair of shoes on the Mezlan Zappos homepage. I searched for the shoes all over the site — to no avail. Exasperated, I sent Zappos an e-mail, asking: “where are those great looking shoes?” No response. I sent another e-mail, and waited…and waited.

Finally, I received a short e-mail:  “Yes, you’re correct; we don’t carry that particular pair of shoes and will remove the photo from our site.” And they did. In fact, here’s the new picture sans shoes:

Mezlan_Shoes

Mezlan on Zappos - Without the Shoes

This is great customer service? So, I related my story to Tony. He seemed mortified, especially after talking about how much Zappos cares about customer experience. He then followed up to have someone reach out to understand what happened so they could fix it, followed by an offer to send me a free pair of any shoes I wanted. Now, not everyone gets to talk to the CEO about their poor customer experience, but Zappos clearly IS different.

What Makes Zappos Different?

Simply stated, Zappos believes that customer service = marketing. Instead of spending loads of money on traditional (and non-traditional) marketing, they focus intensely on delivering a great customer experience—and recovering from mistakes with grace and humility. Tony believes that “the Zappos brand manifests itself through every employee/customer interaction,” and that brand is a lagging indicator of customer experience. His key points:

  • “The phone is a great marketing tool” – I’m not taking about mobile marketing here. Tony made the point that 5 minutes with a customer on the phone is far better Marketing than any web experience can ever deliver. He loves the phone and bricks and mortar touch points and thinks they are often undervalued by companies.
  • “Culture is our number 1 priority” – Many companies talk a good game about culture, but Zappos actually lives it and uses it as a core part of their business model. Zappos has 10 cultural norms that they instill in employees. They interview for these 10 norms, evaluate employees on them in their annual performance reviews, and let people go who don’t follow them.
  • “Authenticity and transparency are really important” – Tony sees authenticity and transparency (to read more on this topic, see my blog post) as a core part of the Zappos brand. When reporters show up at Zappos, they’re shown the bathroom and lunch-room and then told to roam around and talk to whomever they like. Tony’s daily Tweeting is less about Marketing than it is about him trying to make Zappos more authentic and transparent for followers.
  • “Zappos wants totally engaged employees” – Tony only wants people working at Zappos who are really passionate about the company and delivering great customer service. How much does he believe in this? So much that the company offers every new employee $2k to quit after two weeks on the job – they only want the truly committed.

What About Digital and Social Media?

But isn’t Zappos a social media icon? What about Tony’s almost 1MM Twitter followers? Well, get this: Tony hates the “social media” tag. He says they don’t even bother to measure the ROI of their digital and Twitter efforts.

Further, he’s not a believer in creating marketing “buzz.” Instead, he believes the primary role of every employee is to create “positive customer stories” about their Zappos experience. If they do this–everything else, including buzz, will take care of itself.

Oh, and one more thing. Tony does believe in the importance of “influencers,” but not necessarily the digital kind you might be thinking of. He noted that to this day, when his mom calls, he really listens.

Key Learning’s for Marketers

First, having a CEO who really believes in the brand and customer experience sets the tone for the whole organization. This job shouldn’t and can’t be left to the CMO; it’s the CEO’s job too. The CEO and CMO need to be partners in driving a truly customer-centric, marketing focused organization and business model.

Second, actually delivering a great customer experience, particularly in a service oriented business, comes down to employees delivering each and every time they interact with a customer. Building a culture that attracts the right kind of employee and fosters this kind of performance is just as important as any Marketing program.

Zappos Secret Weapons

These are Zappo’s true secret weapons—their CEO as CMO and their unique culture. So what about my Zappos experience? I like Tony’s description of what employees are supposed to do: “Create positive customer/employee stories.” But what I love most of all is that Tony, as the CEO, does what he says. After all, you just read a story about how Zappos recovered brilliantly from a terrible customer experience. Clearly, Tony knows how to create a good story, too.

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