Recessionary Reassurance

The roller-coaster stock market and plunging housing prices have left many consumers afraid. In response, marketers are adopting a softer approach to peddling their wares, playing up comforting images in their ads and focusing on family and the warmth and safety of home.

Some marketers are even reviving old advertising to remind consumers of happier times.

On Monday, Pillsbury, a unit of General Mills, launched a brand campaign about the pleasures of staying in. Dubbed "Home Is Calling," the campaign includes television, print, online and other ads. They feature a variety of characters -- a businessman, a young boy in a library and a woman at a train station -- who click their heels, envisioning a way to get home and eat with their friends and loved ones.

"The economy is so frightening," says Juliana Chugg, president of Pillsbury. "This campaign is an opportunity for us to represent hope in a time when people are feeling scared. To be able to connect home and values like safety, security, warmth and love at home really resonates."

While marketers in areas such as autos and retailing are cutting back ad spending, Pillsbury is increasing its ad budget by double-digits this year and expects to increase spending next year as well, says Ms. Chugg. For its latest campaign, the baked-goods brand speeded up its usual testing process and launched the campaign earlier than planned.

It's a tug-on-the-heartstrings playbook Madison Avenue has used before, most notably after the Sept. 11, 2001, terror attacks. In times of trouble people want things that are familiar, even in advertising, says William Charnock, co-head of strategic planning at WPP Group's JWT agency, which recently revived a well-known jingle for Johnson & Johnson's Band-Aid brand.

Faith Popcorn, chief executive of marketing firm BrainReserve, says "people are looking for warm, cozy places to curl up in" in the current economic climate. "We are in a period of shock right now, and we are looking for respite and revival and restoration."

Marketers ranging from credit-card company MasterCard, to furniture retailer Ikea to consumer brands such as Unilever's Ragú pasta sauce are getting in on the act as well.

MasterCard recently ran a spot focusing on hugs, smiles and laughter as a family gathers on a trip. Ikea's latest tagline, "Home is the Most Important Place in the World," came out of the realization that the mortgage crisis was changing the way consumers shopped at Ikea. "We felt the emphasis of home was about the value of being home than what was inside the house," says an Ikea spokeswoman.

Ragú recently started running print and online ads that emphasize family connections and value. It is thinking of expanding them into TV, says Darren Kapelus, managing director at WPP's Ogilvy in New York. "The perfect meal when your family is growing and the economy is shrinking," says one ad, which depicts a pregnant mom with a young child.

Meanwhile, companies such as J&J and Toys "R" Us are reviving old standbys. J&J's "I am stuck on Band-Aid brand cause Band-Aid's stuck on me" jingle is airing on TV, and so is the familiar "I don't want to grow up, I'm a Toys 'R' Us kid."

"It brings people back to a happier, warmer place, back to when they were kids," says Greg Ahearn, senior vice president of marketing at Toys "R" Us, who says he believes that the combination of nostalgia and low prices will help bolster holiday sales.

Brain Gap

Is human evolution moving at a much faster pace with the proliferation of technology? Research suggests that in the age of technology, your date of birth will have a great effect on the “wiring” of your brain. Discover the pros and cons being a “Digital Native” compared to a “Digital Immigrant” with this video.

Is technology changing our brains? A new study by UCLA neuroscientist Gary Small adds to a growing body of research that says it is. And according to Small's new book, "iBRAIN: Surviving the Technological Alteration of the Modern Mind," a dramatic shift in how we gather information and communicate with one another has touched off an era of rapid evolution that may ultimately change the human brain as we know it. "Perhaps not since early man first discovered how to use a tool has the human brain been affected so quickly and so dramatically," he writes. "As the brain evolves and shifts its focus towards new technological skills, it drifts away from fundamental social skills."

The impact of technology on our circuitry should not come as a surprise. The brain's plasticity—it's ability to change in response to different stimuli—is well known. Professional musicians have more gray matter in brain regions responsible for planning finger movements. And athletes' brains are bulkier in areas that control hand-eye coordination. That's because the more time you devote to a specific activity, the stronger the neural pathways responsible for executing that activity become. So it makes sense that people who process a constant stream of digital information would have more neurons dedicated to filtering that information. Still, that's not the same thing as evolution.

To see how the Internet might be rewiring us, Small and colleagues monitored the brains of 24 adults as they performed a simulated Web search, and again as they read a page of text. During the Web search, those who reported using the Internet regularly in their everyday lives showed twice as much signaling in brain regions responsible for decision-making and complex reasoning, compared with those who had limited Internet exposure. The findings, to be published in the American Journal of Geriatric Psychiatry, suggest that Internet use enhances the brain's capacity to be stimulated, and that Internet reading activates more brain regions than printed words. The research adds to previous studies that have shown that the tech-savvy among us possess greater working memory (meaning they can store and retrieve more bits of information in the short term), are more adept at perceptual learning (that is, adjusting their perception of the world in response to changing information), and have better motor skills.

Small says these differences are likely to be even more profound across generations, because younger people are exposed to more technology from an earlier age than older people. He refers to this as the brain gap. On one side, what he calls digital natives—those who have never known a world without e-mail and text messaging—use their superior cognitive abilities to make snap decisions and juggle multiple sources of sensory input. On the other side, digital immigrants—those who witnessed the advent of modern technology long after their brains had been hardwired—are better at reading facial expressions than they are at navigating cyberspace. "The typical immigrant's brain was trained in completely different ways of socializing and learning, taking things step-by-step and addressing one task at a time," he says. "Immigrants learn more methodically and tend to execute tasks more precisely."

But whether natural selection will favor one skill set over the other remains to be seen. For starters, there's no reason to believe the two behaviors are mutually exclusive. In fact, a 2005 Kaiser study found that young people who spent the most time engaged with high-technology also spent the most time interacting face-to-face, with friends and family. And as Small himself points out, digital natives and digital immigrants can direct their own neural circuitry—reaping the cognitive benefits of modern technology while preserving traditional social skills—simply by making time for both.

In the meantime, modern technology, and the skills it fosters, is evolving even faster than we are. There's no telling whether future iterations of computer games, online communities and the like will require more or less of the traditional social skills and learning strategies that we've spent so many eons cultivating. "Too many people write about this as if kids are in one country and adults are in another," says James Gee, a linguistics professor at the University of Wisconsin-Madison. What the future brain will look like is still anybody's guess.

VIDEO HERE

Source - Newsweek

Hot or Not Video

Google has developed yet another amazing free research and analytical tool. The Hot or Not application allows people to analyze the potency of their digital video content by providing an in-depth analysis of viewer interaction with material posted on YouTube. This tool not only allows you to determine if your video is hot but it will also highlight which parts are hotter than others and where viewers tend to stop watching.

YouTube Insight has helped millions of you learn more about your YouTube videos and figure out when, where, and why your videos are popular. But what if you could learn not just which of your videos are hot on the site, but which specific parts of those videos are hotter than others? What if you could know exactly when viewers tend to leave your videos, or which scenes within a video they watch again and again?

This information is now available to all YouTube video uploaders with an innovative new feature for Insight called "Hot Spots." The Hot Spots tab in Insight plays your video alongside a graph that shows the ups-and-downs of viewership at different moments within the video. We determine "hot" and "cold" spots by comparing your video's abandonment rate at that moment to other videos on YouTube of the same length, and incorporating data about rewinds and fast-forwards. So what does that mean? Well, when the graph goes up, your video is hot: few viewers are leaving, and many are even rewinding on the control bar to see that sequence again. When the graph goes down, your content's gone cold: many viewers are moving to another part of the video or leaving the video entirely.

Here's an example of Hot Spots in action:


You can see that many viewers are not impressed with the dance moves of Michael Rucker, Associate Product Marketing Manager at YouTube; they're leaving the video at a faster than average rate almost immediately after the video begins. But the longer the video goes on, the more people tend to stay, generating a hot spot at the end of the video. Better late than never -- kudos, Rucker!

We think you'll find Hot Spots useful in several ways. For example, users can figure out which scenes in their videos are the "hottest" and edit those videos, or include well-timed annotations, to keep their audience more engaged. Partners might similarly create better content -- like more exciting promotional trailers -- for use on and off YouTube, and advertisers and agencies can study the effectiveness of their creative, to make sure they keep viewers' attention throughout an ad. Now that Insight shows what parts of videos viewers are watching and skipping, creators no longer have to play guessing games. YouTube, the world's largest focus group, provides them with answers. You can find this new feature under the "Hot Spots" tab within the Insight Dashboard.

As with all of Insight's features, we learn about the most creative examples from you. We can't wait to see what you come up with next.

Source: Google Blog

Mirror Mirror

The simple presence of a mirror can be a very persuasive tool. Research has shown that depending on the scenario, mirrors can significantly encourage or discourage a given behaviour. The power of the mirror lies in its ability to depict an individual’s behaviour in a raw and uncut way. Depending on your product or service, you may want to show consumers the mirror as they engage with your brand – or maybe you don’t.

Here’s a prediction: in the coming years, we’ll see mirrors popping up in the entryways of churches and other places of worship. And the reason won’t be to let those entering fix their hair. As we’ll see, the mirror has a rather magical effect on us.

For years, motivation experts have told their audiences to “look in the mirror” as they formulated their goals or imagined the future they wanted. As it turns out, this advice wasn’t all motivational hokum. When we look in a mirror, our behavior is actually altered - at least for a short period of time.

Yes! 50 Scientifically Proven Ways to Be Persuasive by Cialdini, Goldstein, and Martin, led me to mirror and related research peformed both by Cialdini and other teams. The most venerable piece of mirror-behavior research is a 1970s study, Social Awareness and Transgression in Children: Two Field Studies, by Beaman et al. Like many experiments in social psychology, the setup was simple: children making their Halloween rounds were told they could take one piece of candy from a large bowl of candy, and then left alone. About 34% helped themselves to more than one piece. When a mirror was placed behind the bowl so that the children could see themselves as they took the candy, only 9% disobeyed their instructions. The simple addition of the mirror cut the rate of bad behavior by almost three-fourths!

And it’s not just kids that respond to seeing themselves. Another experiment described in Yes! showed subjects either a live video of themselves (rather like looking in a mirror except for the image reversal part) or neutral geometric shapes. They were then given a small task which required them to exit the room with a used paper towel. Almost half of the subjects who saw the neutral images “littered” by dropping the used towel in an empty stairwell, while only a quarter of those who saw themselves did so.

It seems that seeing one’s image causes one to think about one’s behavior and ultimately behave in a more socially desirable way. According to Cialdini, other actions can have a similar effect. Asking people their names can have a similar effect, and one experiment showed that a picture of eyes dramatically reduced “theft” in a break area where employees were supposed to drop money in a jar when they were supposed to pay for coffee or tea.

Cialdini notes that mirrors could be an inexpensive way to cut shoplifting or employee theft in areas that can’t readily be monitored.

I think there could well be some interesting marketing applications for this “self awareness” strategy. The most obvious are for non-profit marketers. Generally, they are seeking financial or time commitments for a cause that most people would consider socially beneficial. What better way to boost the success rate than letting potential donors see themselves?

If a solicitation is taking place in an environment controlled by the non-profit, e.g., their office, one or more strategically placed mirrors (in the waiting room, behind the solicitor’s desk, etc.) could work to increase the close rate and perhaps boost the average commitment. Of course, relatively few non-profits have the luxury of bringing donors into their environment.

I think there are applications for this reasearch in the most common way of soliciting contributions, direct mail. The most obvious would be to include an inexpensive reflective area on part of the solicitation, perhaps accompanied by wording that urged the reader to “imagine the good you could do…” While the image quality wouldn’t be as good as a real mirror, the thought would be there. Personalizing the pitch by printing the donor’s name below the reflective area would likely help as well. More costly solicitations aimed at individual large donors could incorporate a real mirror in some way, or perhaps a photo of the donor. It’s even possible that an image of eyes could help, although clearly it would be necessary to incprporate that in a way that made sense and didn’t appear bizarre.

The neuromarketing implications for other sales situations aren’t quite as clear. One application that comes to mind is the marketing of green products. Trying to sell a buyer on an environmentally-friendly hybrid car? Put a mirror in the closing room. Whether this self-awareness phenomenon would apply to self-image factors that aren’t related to desirable social behavior is hard to say. For example, if an individual thought of himself as a rather dashing fellow, would seeing a mirror help sell him a sports car?

At the moment, I think the most probable benefits of using mirrors or other self-images will accrue to marketers who are clearly on the side of what is socially desirable: charities, universities, green marketers, etc.

Source - Neuromarketing

How To Cope With Aging Brands

Established brands never really die but they do get old and risk becoming obsolete. Adjusting an established brand’s image to cope with new scenarios and a new generation of consumers is critical to its survival. The following examines a number of reinvention and modernization strategies taken by global players who were forced to either adapt or risk becoming archaic.

The story of brands getting old is a story of relevance. Individual brands, or even whole categories, that were once important for a particular consumer segment, become irrelevant as society evolves and tastes change.

In the past, one of the most common situations in which “brands aged badly” revolved around strong associations with national pride. Many brands, such as US automakers Ford and GM, once successfully owned this space. Over time, however, the kind of brand attributes that they were associated with lost their importance as purchase drivers. This was due to a diverse set of realities. More relevant attributes emerged such as the rise of the Japanese manufacturer Toyota’s reputation for quality in the US, the lack of relevance in national pride to new generations of consumers and even the emergence of a “global” mindset in which consumers were willing to try new things from other markets.

The rise of new generations of consumers with new ideas and evolving needs and wants, meant that although these “legacy - national pride associated” brands retained their distinguishing characteristics from their competitors, their attributes were no longer relevant.

This situation has been faced by a lot of European brands in categories such as retail, air travel, telecommunications and many others in which strong brands differentiated themselves by emphasizing their origin and roots: brands like France Telecom, British Airways or Marks & Spencer.

A current example of this situation is observed at Waitrose, the upscale UK grocery retailer. With the credit crunch, mainstream consumer segments are moving away from premium price products as they recognize that acceptable quality exists elsewhere. The ethical and “British grown” part of the equity of Waitrose is not relevant enough to consumers, who are switching to cheaper and even to “foreign” brands such as the European hard discount retailers, Aldi and Lidl, that are performing quite strongly in the UK market.

Brands such as Waitrose now face a tough question: Should I completely lose my current brand equity association so I can become relevant to new consumers?

The answer to this question is usually “no”.

Brands need to evolve their legacy to make sure the things that differentiate them from their competitors are complemented by more relevant purchase drivers. They need to upgrade the different touch points of the business, create new product brands, eliminate others and launch new product lines.

Recent corporate history is littered with examples of brands needing to adjust their brand image to cope with new scenarios and a new generation of consumers.

When telecommunications companies evolved from public-sector businesses to multi-service providers, first expanding into mobile telephony, they created new brands. These were not completely independent from the “traditional fixed line operator” branding but incorporated new attributes that were relevant to this new line of business. Again, the beneficial aspects of the legacy of the ‘aging’ brand which provided scale, reliability and trust were complemented by the personality of the “new mobile brand”. This meant that old fixed telephony brands were able to compete with strong “young” attacker brands.

One of the most successful examples of this was the launch and consolidation of Telefónica’s Movistar brand in Spain and Latin America. The Telefónica brand had a strong trust in its core Spain and Latin American markets, and it leveraged on its equity as the “big, traditional and Spanish” national incumbent. The “Spanish” side of this equation lost relevance in Spain and even became negative in Latin America, where the company wanted to move away from a perception of “here comes the Spanish colonialism again”.

Also, the emergence of mobile communications required it to have a more emotional relationship with consumers. In this context, Telefónica evolved its legacy brand to dial up the aspects of its equity that were relevant to residential and corporate consumers, such as quality, innovation, and any other magnitude related attributes that would build trust.

Click HERE for MovieStar Video

Also, its “Spanish roots” were shifted into emphasizing its corporate “spirit of progress” essence, which highlighted the positive impact that the company had in developing the economy in emerging markets. In parallel, it developed the “younger” Movistar brand. This brand would be supported by the equity of Telefónica but would allow communication with consumers in a language that was more relevant in the mobile business.

But the problem of aging brands is not limited to those with a patriotic tradition, as can be seen from the example of Burger King.

Burger King was an “old” brand that consistently underperformed its category. The essence of its message was “We make better burgers, have them your way”, and this became irrelevant to its consumer base worldwide, who felt much closer to the more emotional approach to the fast food consumption experience that McDonalds was communicating.

It took Burger King time, and multiple changes to its ownership structure, advertising campaigns, management teams and go-to market strategies before it finally understood that its brand had become irrelevant to 18-35 years old males. After it recognised this, and took appropriate action, the fast food giant never looked back. It reshaped its brand, tapping into its roots and embracing innovation across the four Ps - Product, Price, Promotion and Place.

Burger King’s brand evolved its “better quality burger” approach into a rule-breaking, politically incorrect positioning in which it almost tells the consumer, “Yes, we know it is fast food, we know it is red meat, but this is what you like, you like our big and greasy burgers, and nobody needs to tell you what is and isn’t good for you.” Coupled with bold advertising and innovative social media campaigns, this put Burger King back on the map with more than 13 straight quarters of sales growth.

Click HERE for Burger King Video

In the UK, we have recently observed how complete “product lines” at aging brands have died and then reinvented themselves. This situation is quite different from the previous scenarios outlined above because it assumes that the equity that existed needs to be completely wiped out before a brand is able to become relevant to a different segment of consumers. This is probably the reasoning behind the radical branding shift visible at the retail chain from Virgin Megastores to Zavvi.

Management of the CD-retailer-turned-video-game-shop thought that its strong legacy brand, Virgin, was not appropriate for the new directions they wanted for the business. This is quite interesting as it implies that the irreverent/Richard Branson part of the equity of Virgin, that has worked so well in expanding the brand into new territories, was no longer relevant for the new consumer segment that the chain wanted to target. In this context, they completely wiped out all the brand equity and develop a new brand and a new mark.

Not all cases are necessary so dramatic. Sometimes brands just need innovation-driven tactical solutions to rejuvenate themselves and become relevant. For example, the alcohol industry noticed that consumers loved to drink from martini glasses, so you had Sex and the City’s cosmopolitan, bringing vodka and triple sec back on to the scene; or how about putting some Baileys on your coffee?

From these examples, we can see the different directions that companies with aging brands can take.

Telefónica kept its stronger functional attributes and developed a new brand that benefits from it but that can talk to consumers in a more relevant language; Burger King made its brand edgier around its core quality attributes and invested across the four Ps to reshape its image; and Zavvi became a completely different brand with little leverage on its legacy brand (Virgin).

To make these decisions, all these companies needed to understand the purchase drivers of their consumers and which parts of their legacy brands, if any, were still relevant and differentiated them from rivals.

Brands aging (badly) is a reality in multiple industries. Once the company acknowledges the need for change, which is often difficult given their legacy and strong brand equity, the most important decision is to decide which part of the old equity (if any) can evolve, or whether a completely new brand is need. With the right decisions on these points, most brands can live long and healthy lives.

Source - W.A.R.C

Author - Joseph Gelman

PVR - The TV Spot Is Not Dead

Just the thought of PVR can send chills down a marketer’s spine. When PVR was first released, marketers questioned the death of the TV spot and consequently their jobs. However, recent research suggests PVR isn’t the silver bullet it was once thought to be. The following raises some very interesting findings on TV advertising in a PVR world and also includes with some cheeky tips when marketing in this environment.

Television advertisers have a lot to worry about these days. The traditional networks have lost market share to an explosion of specialty channels, and television as a whole is threatened by other powerful entertainment choices like the Internet and increasingly realistic video games. One of the biggest worries is that even when television programs are viewed, the ads may be skipped by using TiVo and other DVR technology. One neuromarketing study purports to have good news for advertisers: the researchers say that people’s brains DO process the information in fast-forwarded commercials.

Now a neuromarketing study finds that viewers aren’t zoning out, but actually pay attention to ads when hitting their fast-forward button. “Our conclusion was that people don’t skip ads,” said Carl Marci, cofounder and CEO of Innerscope Research. “They’re just processing them differently.” [From LiveScience - TV Ads Grab Attention in Fast-Forward by Jeremy Hsu.

Marci used a variety of biometric measures to evaluate how 100 subjects watched an episode of a new television show. These included:
- Skin conductance (to measure emotional arousal)
- Electrocardiography (to measure heart rate)
- Respiration bands (to track breathing rate)
- Accelerometer (to detect motion in any direction)
- Eye-tracking (to determine where the subject was looking)

The results were surprising:

Viewers who watched live better remembered ads a day later than viewers who used DVR to fast-forward through commercials at 6x normal speed. But the DVR group still recalled ads and recognized brands at twice the expected rate, given the fast-forwarding and the complete loss of sound from the commercials.

“People were in a hyper-alert state emotionally, because they don’t want to miss their show,” Marci noted.

Seeing a familiar ad also jogged memories among both live viewers and DVR viewers. The ad recall of DVR viewers shot up from 15 percent to 53 percent when they had seen the ad before.

Similar results were reported last year, as described by Louise Story of the New York Times in Engaging at Any Speed? Commercials Put to Test. Reportedly, some advertisers are optimizing their ads for viewing in fast forward.

I’m a bit skeptical of the effectiveness of most ads when fast forwarded. I try to view recorded programs rather than live ones, largely because I can view the show in a shorter period of time by skipping commercials. I’m actually a lot more engaged when fast forwarding, but (as far as I can tell) that engagement is focused on pattern matching that will tell me the show is back - a distinctive splash screen or establishing shot, etc. If I’m hyper-alert while careening forward, I can hit “Play” and miss only a few seconds of the program, usually with no loss of dialog. I suppose if a big logo hovered in one place for a few seconds while I was fast forwarding, I might process it. I make those comments with some caution, as I’m fully aware of how much our subconscious mind takes in without conscious awareness. Still, this study has the feel of TV networks making a last-ditch stand to defend the value of conventional 30-second spots.

There’s one other obvious pitfall to all of this. Even if there was a way to create a thirty second spot that was effective when compressed to only 5 seconds of high speed viewing, it would provide no defense against my favorite ad-elimination tool: the “skip” button. By leaping ahead in 30-second jumps, it enables the viewer to skip three minutes of commercials in a few seconds. Will the next study say something like, “Fractional-second Exposures Have Big Branding Impact”?

Henry Blodget of Silicon Valley Insider is skeptical, too:

And this means that you, the gullible advertiser, should not only keep spending millions of dollars producing beautiful TV ads with vivid sound, colors, actors, and stories…you should be eager to pay the same CPMs. Even though your ad is on screen for one-sixth of the time and isn’t shown with a clear picture or sound!

What’s one successful way to get your ad noticed? Make it look like the show it appears on. I’ve stopped fast forwarding when I recognized an actor from the recorded show or a scene similar enough to convince me that the program had started. While I resumed fast forwarding after I determined that I was viewing a commercial ad or network promo, these spots did score some seconds of regular-speed viewing with audio.

Source - Neuromarketing

How Poor Metrics Undermine Digital Media

The rapid growth of online advertising hides a serious challenge: the digital world has developed faster than the tools needed to measure it. This problem has made it difficult for marketers to fully exploit the Web’s promise as the most targetable and measurable medium in the history of marketing. Can digital advertising live up to its potential?

The rapid growth of online advertising hides a serious challenge: the digital world has developed faster than the tools needed to measure it. This problem has made it difficult for marketers to fully exploit the Web’s promise as the most targetable and measurable medium in the history of marketing. Can digital advertising live up to its potential?

It’s going to take some time. A June 2008 McKinsey digital-advertising survey of 340 senior marketing executives¹ around the world shows the breadth of the gap between what’s needed and what’s available. Hobbled by nascent technologies, inconsistent metrics, and a reliance on outdated media models, marketers are failing to tap the digital world’s full power. Unless this problem is addressed, the inability to make accurate measurements of digital advertising’s effectiveness across channels and consumer touch points will continue to promote the misallocation of media budgets and to impede the industry’s growth.

Some companies, though, are making progress. The most exciting innovations are taking place in three areas. In media planning, marketers have been developing analytics that allow them to compare the effectiveness of on- and offline efforts. They are also developing a better appreciation of how online marketing messages convert shoppers into buyers, both online and in stores, and using these insights to make specific digital-advertising techniques more effective. Third, to target advertising messages with greater precision, a few leaders are learning to measure the ties among people in social networks—something we call the optimization of social media.

The measurement challenge

Digital advertising has grown strongly over the past six years. Ninety-one percent of the marketing executives in our survey say that their companies are advertising online. Many are beginning to experiment with emerging Web 2.0 vehicles, including widgets, wikis, and social networks. Over half of those surveyed indicate that their companies plan to maintain this spending at current levels or even to increase it where possible. Respondents whose companies are introducing rigorous measurement techniques report a higher level of satisfaction with digital marketing. In fact, 55 percent of them are cutting their expenditures on traditional media in order to increase funding for their online efforts, compared with only 43 percent of the respondents whose companies don’t measure the impact.

These numbers make it all the more surprising that companies have failed to crack the code for measurement. Indeed, a comparison of our 2007 and 2008 surveys suggests that most companies have made little progress in this area. Only a minority of advertisers use quantitative analytical techniques to optimize online marketing. In response to a question about how budgets are allocated across different media, 80 percent of the respondents say that their companies either use qualitative measures—that is, subjective judgments—or simply repeat what they did last year. Over half say that they are not satisfied with the current process of allocation and measurement. The most frequently cited barrier to shifting more money online is “insufficient metrics to measure impact.”

Even if measurement is relatively straightforward, marketers are apt to use a qualitative rather than quantitative approach. When we asked respondents how they gauge the effectiveness of their digital-brand-building efforts and direct-response advertising, their answers revealed a startling failure to measure. Only half of the respondents’ companies use even the most basic of metrics—the click-through rate—to evaluate the impact of direct-response advertising. Similarly, only 52 percent of the respondents whose companies are trying to build their brands assess the increase in brand strength.

The numbers drop even further when we asked respondents about more sophisticated techniques. Most companies recognize that their customers’ purchasing decisions result from a number of contact points. A single purchase, whether online or in a store, might be influenced by any combination of, say, the comments of a friend, information on a Web site, a recommendation from Amazon.com, a store visit, or contact with a call center. Yet only 30 percent of the marketers in our survey report that they consider the offline impact of online marketing. Marketers who do look at those metrics are generally more satisfied with their online efforts: they planned to increase spending on it by 38 percent, compared with 26 percent for those who didn’t conduct that analysis.

Poor measurement can have an impact more severe than just a few lost return-on-investment (ROI) percentage points; it can inspire fundamentally bad decisions. In late 2007, for example, McKinsey conducted a study of 3,000 European broadband users. This study, which followed an earlier one in Belgium, showed that consumers are increasingly apt to combine online research with offline purchasing and vice versa. In fact, purchases made strictly through a single channel make up less than a third of the total. Any company that measured a site’s effectiveness solely through online sales would miss much of the impact and therefore risk underinvesting.

Just as important, many marketers fail to measure the ability of offline media to influence online sales—another omission that could lead to misallocations. The European broadband study showed that 60 percent of online purchases involve an offline touch point, either at the brand-awareness level (“I know this brand from a TV commercial”) or at the consideration level (“I browsed through a magazine and noticed an ad that referred to a Web site”). A US home-furnishings retailer found recently that almost a quarter of its online buyers use its stores to investigate products before making a purchase. In fact, almost half of the retailer’s shoppers reported that it was critical for them to examine products in a physical store before purchasing online. Without this insight, management might well have underestimated the value of stores in driving online revenues. The European study found that, in many areas,² offline sales driven solely by online activity plus online sales driven by offline activity together represented an amount more or less equal to total online sales (exhibit). Thus, marketers who fail to assess the cross-channel impact of their advertising underestimate its effectiveness dramatically.

Emerging solutions

There are some signs of progress in efforts to measure the effectiveness of online advertising, even across channels. Although a majority of companies still have a long way to go, some marketers have made rigorous measurement a priority. As one participant stated in a recent McKinsey online discussion among marketers using sophisticated analytics: “If we can’t measure it, essentially, we don’t do it.”

As for allocating ad budgets, leading marketers are now using metrics that permit comparisons between offline and digital spending. One marketer—a home-furnishings rent-to-own chain—used a method called RCQ (for reach, cost, and quality) to optimize its allocation of spending among ad vehicles. This metric, combining rigorous analytics with systematically applied judgment, measures the number of people each ad vehicle reaches and the cost of reaching them by vehicle. It also includes a quality factor based on changes in engagement, attitudes, and behavior. The RCQ analysis showed that the chain spent too much on its workhorse vehicles, such as direct mail, and too little on television infomercials (which convey more information) and online ads (which can be targeted more precisely).

Some participants in a recent McKinsey online discussion among marketers say they were moving in a similar direction. “While the ROI–ROE may be a little ‘apples and oranges’ for some channels,” one participant said, “we create generic key performance indicators across most of our efforts and compare the effectiveness of each channel.”

Some retailers and automotive companies are trying out quantitative ways of assessing the impact of on- and offline ads in other sales channels. One specialty retailer, for instance, tested the effectiveness of online vehicles such as banners, affiliate programs, and paid search in driving sales both online and offline. The retailer used coupons redeemable on its Web site and in stores to track results across channels. The test showed that online media vehicles promoted offline sales very effectively: more than three-quarters of the coupons were redeemed in stores. This finding led the retailer to shift its spending away from some traditional media, particularly newspaper circulars, to online vehicles. The ability to track the impact of all spending across channels continuously might be a few years away, but the payoff is already clear.

Techniques for optimizing online ads have come even further. “Programs and interactions are constantly changed, based upon measurement,” said one participant in the online discussion. “This may even include real-time changes in interaction, based upon different control tests. We change format, site selection, network structures, and buys.” Some marketers are starting to use the technology that manages online ad campaigns (the ad-serving platform) to assess the impact of all online touch points, instead of basing the optimization of media on the last click before a conversion. (More often than not, that is a branded paid-search term.) This approach requires an understanding of response rates by customer segment in order to serve more relevant ads across third-party sites and a marketer’s own site.

Finally, companies are starting to tap into the real promise of social media. Our research showed that a major European cable company undertook a marketing campaign along these lines to sign up customers for a cable service. The campaign, targeting online customer segments, sought to maximize the ROI of each individual ad opportunity by serving whatever ad most promisingly combined likelihood to convert with profitability of conversion. After the company segmented its customers by the sites they visited online, it could use each person’s past behavior to deploy the most appropriate ad vehicle—e-mail, graphics-rich media, or video. This strategy raised conversion rates by 50 percent.

McKinsey research on telephone users’ social networks suggests that even they can be measured to allocate marketing budgets more successfully. One telecom company, for example, has learned how to retain phone customers by assessing the strength of the relationships among them. The company used call patterns, changes in call volumes, types of payment (prepaid or contract), handset types, and other traits to identify customers likely to leave for another carrier. Meanwhile, it constructed a diagram of their social ties, derived from the people they called, the people those people called, and how often. In general, the more closely anyone was tied to someone who unsubscribed, the more likely that person was to unsubscribe in turn. In this way, the telecom company improved its churn prediction model by 50 percent. Moreover, by identifying the most influential potential churners and working to retain them with new services and price plans, the company not only retained a quarter of them but also reduced the churn rate within their social networks by almost 40 percent.

Another telecom company used a similar social-network mapping technique, based on the e-mail traffic of customers who also subscribed to a broadband connection. On the theory that members of a network have similar needs, the company offered people in its customers’ e-mail networks the same telephone and broadband plans its customers had. The campaign had a conversion rate that was up to 80 percent better than that of other direct-marketing campaigns we researched.

Online media have enjoyed tremendous growth and will continue to do so. Our survey suggests, however, that this growth will be far more robust if marketers implement accurate measurement techniques that help them understand the true impact of ads.

Source - McKinsey Quarterly

Why Some Brand Cheer A Sour Economy

Marketing and recessions aren’t the best of friends. In fact, marketers will often refer to a recession as the “R-word”. Interestingly, periods of recessions end up working better for certain brands than periods of growth. The aggregate decrease in spending during a recession isn’t good for anyone but the change in distribution of consumers spending is welcomed depending on the product or service being marketed.

It is a good time to be McCormick spices. While not the sexiest of brands, "The taste you trust" is positioned extremely well for an economy that looks to be in a recession.

While many companies are suffering at the hands of one of the worst economic downfalls in the history of the country, others are quietly prospering.

"If you're a brand you eat, drink, smoke or wash yourself with, you're going to be OK," said Marc Babej, partner at the strategy firm Reason, New York. "McCormick spices, think about it, you will always need that. No matter how bad things get, you will still cook at home." McCormick's net sales for the brand rose 9% to $782 million for its third quarter.

Similarly, production of snack foods, tortillas and confectionary products are expected to grow next year, per industry research firm IBISWorld, Los Angeles. Snack foods industry constant dollar revenue will grow 5.3%, tortillas (3.1%) and confectionary products (2.7%).

Another likely beneficiary of the down economy: Private label. Some retailers are already seeing the bump. Walgreens, for example, announced its private label sales were up 15%.

Private label is "positioned to move and grow," said Gary Stibel, CEO of New England Consulting Group, Westport, Conn. "Kroger and CVS are two examples of brands that are doing a great job of promoting their own labels."

Likewise, Wal-Mart, which seemed to be losing brand power only a year ago, today is poised to reap the rewards of consumers who are looking to save some cash. In September, as same-store sales for Kohl's and Nordstrom fell 5.5% and 9.6%, respectively, Wal-Mart's rose 2.4%. Author and branding expert Rob Frankel thinks the retailer's gains will closely mirror the economy: "Wal-Mart is the brand that reminds people they are poor. Nobody shops at Wal-Mart because they want to; they shop there because they have to. The minute the economy recovers, Wal-Mart's sales will drop like a brick."

Wal-Mart's not the only discounter to see business improve. Wholesale clubs same-store sales grew 7.4% last month compared to the same period last year, per the International Council of Shopping Centers, New York.

Meanwhile, discount retailers, thrift shops, consignment stores and goodwill stores saw an 85.5% increase in customers (January-August 2008), per the National Assn. of Resale & Thrift Shops. About 63% also saw an increase in sales.

While they may be looking for inexpensive groceries and second-hand items, consumers are willing to spend on some forms of escapism. Entertainment can expect to fare well during a downturn, experts say. The weekend after a $700 billion bailout was passed by Congress, theatergoers flocked to the malls, sending the weekend gross for the top dozen flicks to $95.4 million, up 41.5% from the same period a year ago, per Media by Numbers, Encino, Calif.

"The conventional wisdom is that an economic downturn helps the movie business," said Paul Dergarabedian, president of Media By Numbers, Los Angeles. "They find escapism for a relatively small amount of money."

Then there's beer. It seems only logical that watching the Dow plummet into the abyss would drive some to drink. The U.S. beer industry is expected to post its second consecutive year of case sales gains, per the Beverage Information Group's 2008 Beer Handbook. Wine and spirits are also expected to continue to grow though consumers may be less likely to trade up as had been the trend.

Another category that's already enjoying a boom in this economy: vocational and two-year colleges, which were seeing a migration of students who are priced out of four-year colleges, noted Robert Coen, svp and director of forecasting at Universal McCann, New York. "It doesn't add up to a whole lot for the industry in terms of ads. But they can kick up enrollment at a pretty good clip right now."

And finally, for those looking to avoid school in the immediate future, a sector that looks particularly strong is repair services.

"During tough times we typically point to certain categories/sectors," said William Madway, marketing professor at the Villanova School of Business. "Repair services, remodeling services, do-it-yourself products, services and retailers . . . [Still], every brand has the potential to be successful if they adapt to the economic realities."

Source - Brandweek