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Marketing in the era of accountability June 19, 2007

Posted by Keith in Business, Opinion.
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Everything you know is wrong
by David Tiltman Marketing 12-Jun-07, 08:30
LONDON – So you thought TV was dead. You believed marketing was all about ROI. Well, think again. A study out this week from the Institute of Practitioners in Advertising explodes some of marketing’s myths.
The report, entitled ‘Marketing in the era of accountability’, is based on the IPA’s database of effectiveness awards case studies, and identifies common misunderstandings throughout the marketing process. Below are an exclusive summary of five of the key findings.
You’re measuring the wrong things
Brand awareness, brand image, consumer attitudes – these are some of the metrics that have become a marketer’s stock in trade. But as proof of effectiveness they are fundamentally unreliable. The IPA’s report, which analyses effectiveness case studies from the past 25 years, concludes that marketers pay too much attention to these factors and too little on measures that directly affect the business, such as market share.
Though fewer than 20% of marketers evaluate the effect of their communications on profits, the study concludes that campaigns that set hard objectives, such as ‘improve profits’, are more effective than those that focus on intermediate goals. Marketers rely too heavily on intermediate metrics as they are easy to measure and move more dramatically in the short term.
The study draws a distinction between effectiveness (doing the right thing) and accountability (being seen to do the right thing). Authors Les Binet, European director at DDB Matrix, and consultant Peter Field argue that, with accountability high on the corporate agenda, marketers are opting for measures that prove to the board that something is happening. ‘It is not just a question of marketers measuring the wrong thing,’ says Field. ‘They are being pushed to do it by this move to accountability.’
Another common failing is holding up a single metric as proof of success. Instead, a suite of measures should be used to judge effectiveness.

Best practice
•    Draw up detailed goals based on hard measures.
•    For commercial campaigns, profit should usually be the ultimate objective.
•    Intermediate measures are only useful as leading indicators of a campaign’s performance.

Forget the rational, work on the emotions
The research found that, overwhelmingly, the most effective campaigns are those that focus on emotional, rather than rational, appeal. Naturally, this is the case in categories such as luxury goods, but even in more rational categories, emotion works best – Cravendale Milk is one brand that switched from rational to emotional ads and saw an improvement in performance.
These findings are not new, but marketers have been slow to turn theory into practice. ‘A number of people have believed this for a long time, but the marketing community institutionally has failed to accept it,’ says Binet. Again, a big reason is that it is more difficult to demonstrate responses to emotional appeals.
Emotions work best when the economy is on the up. In less prosperous times, price becomes more important, so in these cases marketers should consider mixing emotive brand messages with price communications.
Marketers should not discount direct-response work based on rational appeal. These are effective for short-term sales effects, and are suitable when targeting people who have already made up their minds to buy. But it is worth using emotions to ‘warm up’ consumers before they start actively shopping.
The most effective campaigns are those that build brand fame and get people talking about it. The recent Marks & Spencer ads are a good example.

Best practice
•    Emotions should be at the heart of a campaign, not bolted on to rational persuasion.
•    The objective should be making a brand famous. This can lead to major gains in profits.
•    Use direct-response appeals for short-term goals and to target active shoppers.

Television is still alive and kicking
If some commentators in the marketing industry are to be believed, TV is on its death bed. But, in fact, the IPA study reveals that it remains the most effective medium. TV, which builds emotion better than any other medium, has been the driving force of many of the best campaigns in the IPA’s archives, even those with small budgets. For brands looking to build fame, TV remains essential.
If anything, TV is becoming more important than ever. The average rise in market share accounted for by campaigns where TV is the lead medium has increased over the past 20 years. And with greater choice of TV channels allowing more effective targeting, the cost of reaching a given audience via TV has declined. The authors estimate that TV is now 42% more effective than it was in the 80s.
That said, there is still more to advertising than TV. The evidence shows that multimedia campaigns are more effective than single-medium activity, though they are harder to evaluate. Yet marketers can spread their media budget too thin – campaigns with three media tend to work best, and ads should be supplemented with non-advertising channels.

Best practice
•    Spread advertising across more than one medium, as these campaigns work better than single-medium activity. But don’t use more than three or four media.
•    TV should not be neglected. Media such as outdoor are best used as secondary channels.
•    If long-term brand effects are an objective, judge media opportunities on their power to engage emotionally with consumers.

You can’t build customer loyalty
Two common goals of marketing campaigns are to increase penetration of a brand and to build the loyalty of customers. Of the two, campaigns that focus on penetration are more effective, even though loyalty campaigns are more than twice as common.
Loyalty campaigns underperform on nearly every metric; only 9% actually increase loyalty significantly, not much higher than non-loyalty campaigns. Penetration is a far more fertile marketing objective. This holds true across all categories – even in markets where reducing churn is imperative.
Some marketing that attempts to build loyalty delivers significant profits. But the IPA’s report argues that when such campaigns deliver, they do so more by recruiting new customers than by reducing churn or increasing revenue from existing ones.
Demonstrating that you treat customers well can work as a recruitment tool. Binet points to an O2 campaign that talked up the benefits it provided for existing customers. According to his analysis, it was more effective in boosting penetration (since the campaign was viewed by non-O2 customers) than improving loyalty among existing ones. These results fly in the face of much of the CRM movement. ‘We’re not saying loyalty isn’t important,’ he says. ‘But it’s not how you build a brand. Nobody really wants to believe it.’
Best practice
•    Don’t assume that your marketing activity can significantly improve loyalty.
•    Use penetration, not loyalty, to measure performance, unless greater penetration is impossible.
•    Aim to change, rather than reinforce, behaviour. The reinforcement strategy is much less effective.

ROI is not your ultimate goal
In theory, the term ‘return on investment’ is simple – it is the ratio of profits derived from marketing to marketing expenditure. As a concept it makes marketing seem accountable. However, the research shows that ROI is poorly understood in the marketing world.
Interpretation of ROI can be very loose – many assume that all sales growth is due to communication, and that all direct sales are purely the result of direct-response communications (when in fact they may have happened anyway).
Payback should ultimately be about profit, but many confuse added profit with added revenue – roughly two-thirds of case studies make this mistake.
Another misconception is that maximising ROI is a goal in itself. As ROI is a ratio, often the easiest way to improve the figure is simply to cut expenditure, yet that would damage the brand. Instead, marketers should be focusing on goals that are defined in absolute terms, such as generating certain amounts of profit.
Measures of ROI also tend to focus on short-term changes, yet brand-building tends to require long-term investment. Calculating long-term payback is far more difficult, and different measures are required.
In fact, long-term effects of investment are often underestimated. For brands in mature markets, marketing can be about defending sales, rather than increasing them. The payback can be calculated only by working out the impact of a cut in marketing.

Best practice
•    Don’t make an ROI ratio a goal in itself.
•    Be clear about what is revenue and what is profit, and ensure the correct profit margin is used.
•    Take account of both long- and short-term effects.

Dr. King, Rosa Parks, Katrina and… General Motors? October 30, 2006

Posted by Celso in Advertising, Opinion.
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OK, I guess I wasn’t the only one moved by the latest General Motors ad, featuring a catchy song by John Mellencamp and images of American symbols like Martin Luther King, Vietnam and 9/11. The brand association is just plain awful. As an Ad Age critic mentions in this New York Times article, this type of ad consists of using negative images (like New Orleans under water and the Twin Towers burning) to generate a positive response from consumers. After all, it’s the ultimate goal of any marketer to create an emotional connection with the end consumer but using negative images to do so is not very common.

Honestly, I love the ad content. It’s quite entertaining, touching and for someone not born in the States, it embodies all of the appreciation I feel for America, which has welcomed me and fostered my personal development in this past decade. However, the brand association part goes too far. It could have been some subtle, like saying that GM salutes America or something like that. Instead, by using a slogan like “Our country, our truck. ” GM proves once again that is a desperate company with a shortsighted, shallow marketing strategy, quickly sinking under foreign competitors. Some would even argue that the message behind the ad is simply that “unless you buy the truck, we’ll go under”… just like New Orleans did.

If Only The Cheeseburgers Were That Good… October 4, 2006

Posted by Celso in Advertising, Opinion.
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Mc Donalds may have disgusting food… Wait, I shouldn’t even call those nuked, trans-fat filled, coronary exploding things food. Nevertheless, despite its tasteless meat and supersized customers, we now have at least one reason to be proud of Mc Donalds. No, I am not talking about its delicious (and frozen if eaten when the store first opens) parfait. I’m referring to a couple of ads that given its creativity, surpassed its initial intended reach and found themselves a new home on the web, center to avid discussions of ad lovers or if anything, McDonalds haters like me. The quality of the ads certainly scored high with me but still, not high enough to make me eat there.

Here at the ads… They can be easily Googled and were featured on Web 2.0 sites such as Digg.com and Del.icio.us, which by the way, are amazing websites and well worth checking it out.

1) The Sun Dial Outdoor in Chicago, IL

Courtesy of Chicagobusiness.com

2) Illegal download ad at Georgia Tech

Audiophiles and Apple’s iTunes Music Store September 28, 2006

Posted by Michael in Opinion.
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I downloaded the new iTunes 7 last week, and then got to thinking: What a wonderful marketing model that Apple has developed to get people to alter their illegal downloading habits and actually feel cool plunking down 99 cents for a song! Then I considered a few of the pros and cons of iTunes:

Pros: enormous song selection, elegant and simple purchasing interface, quick download, legitimacy, royalties to the artist

Cons: flat pricing, regardless of whether the song is “Her Majesty” by the Beatles (17 seconds) or “Stairway to Heaven”  by Led Zeppelin (8 minutes), AAC files compressed up to 90% from original audio files

The last point in the “Cons” is what bothers me, and is the reason why, despite their brilliant marketing campaign, phenomenal song search engine and luscious store, I have only purchased eleven songs from the Music Store. It seems like the music industry in general, and Apple in particular, in an (admittedly admirable) effort to shift the habits of the music buying public toward legal downloads, has pulled the rug over the heads of their very biggest fans, taking their money and leaving them with song files that are in essence, at 128 kpbs, like grainy versions of the original. This bothers me because, while the average teenager or young adult will listen to that music on tinny iPod headphones, or blaring out his car stereo via a cheap cassette adapter, and not really care about the sound quality, there is a segment of the market which will be cheated out of their purchase by a compromised file which really sounds lousy to a reasonably trained ear when played back on a decent stereo system. I, for instance, do not really want to grow my music collection of hundreds of CDs by investing in compressed files which, when I play them alongside CDs on my stereo, sound like tinny AM radio broadcasts.

What I am getting at is that buying 128 kpbs AAC files on iTunes is a terrific alternative to buying music on cheap, low-quality cassettes, but is no substitute for the crystal-clear quality of a CD or DVD-Audio, and this is something that I think Apple and the other music download services need to address so their biggest customers do not feel cheated out of their money in the long run. Perhaps they could create a premium service for audiophiles so that, for a higher price, they could get a perfect copy of a song, complete with digital rights management.

Of course, one could still go to a store and purchase a CD, but then the brilliance and convenience of the legal download model is lost.

Any further thoughts on this issue? I’d love to hear others’ opinions.

Commercials as Entertainment September 24, 2006

Posted by vsvander in Advertising, Opinion.
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About two weeks ago, one of my ex-coworkers e-mailed me a link to a funny commercial she had found on the Internet. Coincidentally, I had just given a group presentation on podcasting wherein I addressed the problem marketers had with embracing the new technology: Why would anyone choose to download an advertisement?

Apparently, there are multiple websites dedicated to sharing unusual and funny ads. Here’s what I found when I did a Google search — but I’m sure there are others as well:

http://dmoz.org/Arts/Television/Commercials/

I have to wonder, who are the ad geniuses that suckered the public into voluntarily watching commercials by dressing them as a form of cult entertainment? Do you agree that this is a peculiar phenomenon?

Last Night’s Mixer and Incoming Class August 8, 2006

Posted by Celso in Announcements, Opinion.
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I attended the new student mixer last night in Malibu and I have to say I am impressed with our incoming class. It seems to be a great group of people (and very organized too!). I know I spoke with a few about the Marketing Society, our goals and upcoming events but I obviously didn’t have a chance to get to everyone.

If there’s any questions I can answer about M, please don’t hesitate to ask. My email once again is celso.oliveira@pepperdine.edu

Enjoy the rest of your vacations!