Applying The Science Of Measurement To The Art Of Advertising    1 March 2010 Slideshare
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Applying The Science Of Measurement To The Art Of Advertising 1 March 2010 Slideshare

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Ways that marketers can measure the efficiency and effectiveness of their marketing programs.

Ways that marketers can measure the efficiency and effectiveness of their marketing programs.

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  • The real/ultimate death of mass media 500 channels on TV & less influence of TV networks Higher TV rates for fewer viewers Higher Newspaper rates, lower readership Printed newspapers will be extinct by 2014 – (Davos 2007) Radio going satellite (Sirius, XM) Effects of time shifting and on-demand (TIVO, DVR’s, Digital, etc.) Messages delivered or offered to smaller segments Nirvana is segments of one… But they constantly change Understand the media consumption habits of your customers How do they receive, process, transmit and circulate communications? How does it change with demographics, psychographics, geography, timing and as new media and channels are created? Note the 3 C’s of 1960’s advertising: Creative, Cigarettes and Canadian Club Whiskey
  • The quid pro quo among marketers, channels & consumers is gone Marketers are resistant to support broad media & channels Consumers unwilling to pay for information from media Multichannel marketing is now the rule Broadcast, print, direct mail, email, web… None stand alone Purchase decisions are collaborative, not linear Be with customers on their journeys, nurturing them along the way Brand marketing is no longer about just changing perceptions, it’s about changing behavior Moved from exposure to involvement and engagement Brand & response are interwoven
  • The last couple of years have seen a number of efforts by marketing professionals and academics to summarize marketing’s performance in one metric.  Reicheld’s Net Promoter Score, Peppers and Rogers’ Return On Customer and Doyle’s Increase in Shareholder Value are examples of such efforts.  While some of these metrics can be useful performance indicators, they will never be able to explain the workings of marketing in its entirety. 
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  • 1. Business contribution These are effectiveness measures comparing the performance of the online channel with other channels. Examples: • Online revenue contribution ($, %) – direct and indirect (i.e. transacted online and referred online from offline); • Online profit contribution ($, %) – Profit contribution to the company in the period; • Online sales transaction contribution (n, %) – direct and indirect (% sales online may differ considerably from % revenue or profit contribution if there is a different average order value or profitability online); • Online service transaction contribution (n, %, $) – what percentage of different types of customer service occur online. Cost savings can be calculated for these also; • Online reach % – Share of online users attracted to the site in an industry category in a week or month assessed by services such as Hitwise or Netratings. Strictly, reach should be assessed through reaching customers via third party sites; • Online market share – % of online market revenue captured in comparison with offline. This is difficult to establish in some markets, dependent on industry collaboration; • Online customer migration – % of existing customers using online services. 2. Marketing outcomes: • Sales (n, $) (If relevant); • Leads (n) (registrations of other opportunities to sell); • Cost per Acquisition (CPA) – Promotional cost of obtaining a first time sale; • Other costs – Cost of good sold and average margin. Cost of service; • Average order value (Basket size); • Lifetime value ($) for different customer groups; • Average touch frequency – for example, for e-mail marketing. 3. Customer satisfaction: • Customer satisfaction and loyalty indices; • Number of comments from site and e-mail (% favorable and unfavorable); • Brand metrics (brand favorability); • Site performance and availability; • E-mail enquiry response time and accuracy. 4. Customer behavior: • Site engagement rates (Bounce rates overall and for different pages); • Site conversion rates (Visit to Sale, Visit to opportunity and Opportunity to Sale); • E-mail conversion rates (Newsletter and campaign related); • Visits involving a page view in different categories (Product pages, Service pages, Where to Buy, Contact Us). Visits / customers can be scored according to this; • Visits to purchase/Time to purchase – indication of number of visits involved with purchase; • Number of products purchased per customer; • Transaction behavior (Recency, Frequency, Monetary value analysis for different categories and customer types). RF analysis also relevant for site visits, e-mail response and different service types; • Activity or participation levels (Percentage of customer base / registrations who are actively using online service(s)). nActivated, nActive, nDormant, nLapsed, etc.; • Loyalty or churn metrics (% of customers repeat purchasing in given time, e.g. 1 year). 5. Channel promotion: • Referrer mix from different sources (direct, search, affiliates, etc); • Share of search (main terms within market); • Cost Per Click/Cost Per Contact (Visitors) average and CPM average for online/offline ads. 6. Social Media A variety of measures that quantify some very soft measurements. This is state of the art just now.
  • Like other forms of direct marketing testing, merchants can use either A/B or Multivariate testing to test headlines, offers body copy, offers, calls to action, images, product pages, order pages, guarantees, prices, bonus offers, and many other variables Merchants often report dramatic increases when testing different copy text, form layouts, landing pages, images and background colors. However, not all elements produce the same increase in conversions, and by looking at the results from different tests, it is possible to identify those elements that consistently produce the greatest increase in conversions for a marketer’s web site. Different customer groups react differently, which is why testing is so important.
  • There are two kinds of web testing for E-Commerce sites. A/B testing, also called split testing, allows the testing of two different versions of a design, copy or offer, to see which performs the best. For decades, this has been a classic method in direct mail, where companies often split their mailing lists and send out different versions of a mailing to different recipients. A/B testing is also popular on the Web, where it's easy to make your site show different page versions to different visitors. Use A/B testing when a web site gets fewer than 1,000 page views per week. It is useful when testing big things. For example, if moving complete sections provides an advantage or if changing the overall copy and design works better than the established copy and design. Multivariate testing is the most robust way to test a lot of variables at one time. This advanced statistical methodology can test the effectiveness of limitless combinations. The only limits on the number of combinations and the number of variables in a multivariate test are the amount of time it will take to get a statistically valid sample of visitors and a marketer’s computational power. This form of testing can only be done when a web site receives more than 1,000 page views per week. It can help an E-Commerce merchant optimize multiple content changes in different parts of a multiple web pages simultaneously.
  • A/B testing is the simplest and easiest form of web testing. Based on “the Scientific Method” of statistical analysis, it’s main limitation is that only way variable can be tested at one time. In the example, all variables remain the same with the exception of the design. So, design is the variable that was tested. Headlines, offers, images or products could be tested. Often merchants choose A/B testing when they want to test completely different pages. That’s okay, so long as what is being analyzed as the variable is the complete difference. Like other forms of direct marketing, it’s best to test the big things. If you can’t see the difference in two different combinations being tested, it’s unlikely that visitors will.
  • Multivariate testing is an area of high growth, as it helps websites ensure that they are getting the most from the visitors arriving at their site. Search engine optimization and pay per click advertising bring visitors to a site and have been extensively used by many markerters. Multivariate testing allows marketers to ensure that visitors arriving at their website are being shown the right offers, content and layout to convert them to sale, registration or the desired action. In the example, headlines, offers, copy, images, background colors are tested. It’s easy to get carried away with multivariate analysis. So, it’s better to test a small number of variations to insure that there are at least 100 conversions per combination analyzed. Website visitors will vote with their clicks for which content they prefer. Multivariate testing is transparent to the visitor, and technology is capable of ensuring that each visitor is shown the same content on every visit. Both A/B and Multivariate Testing allow the market to decide a marketer’s best web page options. There is no room for guessing.
  • From blogs and landing pages, to official outlets on social media sites, marketers now manage a large extended web that thrives beyond the borders of the traditional web site. Great conversion optimization must leverage the dynamics of each layer — and coordinate the interaction between them. The different layers of this extended web require different methods of conversion optimization thrive in each: Core web : online applications Inner web : your traditional, navigable web site Outer web : landing pages, blogs, microsites Social web : outposts on social media sites Advertising networks : paid media on other sites For instance: The outer web is where the best practices of landing page optimization and post-click marketing shine. Users have more flexible expectations on landing pages, especially when responding to specific, targeted offers. You can engage in full-scale A/B testing of different layouts, content presentations, multi-step flows, calls to action, and behavioral segmentation choices — almost anything you can imagine.
  • Elusiveness continues to prevail however. The study found that the exact impact of social media tactics evade the grasp of CMOs. - 53% are unsure about their return on Twitter -50% are unable to assess the value of LinkedIn or industry blogs More specifically however, roughly 15% believe there is no ROI associated with Twitter and just over 10% cannot glean ROI from LinkedIn or Facebook. I believe this is the direct result of not tying activity to an end game, the ability to know what it is we want to measure before we engage. Doing so, allows us to define a strategy and a tactical plan to support activity that helps us reach our goals and objectives.
  • Social Engagement Index (SEI) - The SEI is a proxy for a brand social reach and is calculated by weighting the raw number of conversations by the reach of its participants.  The raw score is then calibrated into an index.  A score of 100 is the base brand score.  Anything above this indicates a greater net reach of social conversations compared to the average brand. Social Sentiment Engagement Index (SSEI) - The SSEI is a composite that combines measures of both engagement and sentiment.  We calculate engagement by measuring the raw number of social conversations factored upon the reach per conversation participant.  We then apply a function that accounts for the sentiment of positive and negative comments.  Finally we calibrate this into an index based upon 100 point brand score.  Anything above this indicates a greater net amount of positive engagements, while a score less than indicates more negative.  The further away from 100 a score falls the more intense the sentiment.
  • Social Sentiment Engagement Index (SSEI) - The SSEI is a composite that combines measures of both engagement and sentiment.  We calculate engagement by measuring the raw number of social conversations factored upon the reach per conversation participant.  We then apply a function that accounts for the sentiment of positive and negative comments.  Finally we calibrate this into an index based upon 100 point brand score.  Anything above this indicates a greater net amount of positive engagements, while a score less than indicates more negative.  The further away from 100 a score falls the more intense the sentiment.
  • Cost Per Social Impression (CPSM) - How much would you be willing to pay for a Tweet?  or a new fan or follower?  Clearly social media is in its infancy as a cross-channel media measurement tool, but already it's clear the social space is an excellent medium for measurement as it reflects and resonates brands spend in other channels.  In an effort to gauge how successful the brands were at converting their Super Bowl media spend to social engagement we've taken the potential reach of the conversation, using a popularity score as a multiplier, and divided it by the media spend.  In looking at a brands CPSM, the closer to $0.00 the better.

Applying The Science Of Measurement To The Art Of Advertising    1 March 2010 Slideshare Applying The Science Of Measurement To The Art Of Advertising 1 March 2010 Slideshare Presentation Transcript

  • March 1, 2010 Ron Jacobs [email_address] Applying the Science of Measurement to the Art of Marketing A Presentation for
    • Ron Jacobs
    • President, Jacobs & Clevenger
    • Co-Author, Successful Direct Marketing Methods
    • Sponsor, Ron Jacobs & Bob Stone Multichannel Marketing Communications Certificate Program, DePaul University
  • Agenda
    • How to forge a connections between marketing activities and business outcomes
    • Explore marketing effectiveness using Return on Marketing Investment
    • Why establishing Key Performance Indicators is the starting point for measureable marketing
    • Explore attribution models for multichannel marketing communications
    • Describe Social Media Marketing Measurement
    • Identify attributes necessary for agency staffers that can make the transition to measurable marketing
  • The problem of the gold bar
    • A worker will perform for seven straight days.
    • An employer agrees to pay 1/7th of a bar of gold per day.
    • What are the fewest number of cuts to the bar of gold that will allow the employer to make a payment of 1/7th of the bar each day?
  • The problem of the gold bar
    • Day Worker Employer
    • Start 0 = 0 1/7 th + 2/7 th = 4/7 th = 7/7th
    • 1/7 th = 1/7th 2/7 th + 4/7 th = 6/7 th
    • 2/7 th = 2/7 th 1/7 th + 4/7 th = 5/7 th
    • 2/7 th + 1/7 th = 3/7 th 4/7 th = 4/7 th
    • 4/7 th = 4/7 th 1/7 th + 2/7 th = 3/7 th
    • 4/7 th + 1/7 th = 5/7 th 2/7 th = 2/7 th
    • 4/7 th + 2/7 th = 6/7 th 1/7 th = 1/7 th
    • 1/7 th + 2/7 th + 4/7 th = 7/7 th 0 = 0
  • Accountability. It’s not about what is measured, it’s about effectiveness and efficiency
  • The golden age of brand marketing
  • The current age… The Agency of today
  • Marketing accountability provides a framework for aligning marketing, finance and sales.
    • 33% of respondents use cross-functional teams to address accountability (Marketing, finance and research)up from 22% in 2008.
    • 19 % that they were confident that if they had to cut marketing spend by 10 percent, they could use metrics and analysis to forecast the impact on sales
    • 70% shifting investments from traditional to digital media
    • 53% are shifting investments from brand-building initiatives to promotional marketing
    • 43% use customer lifetime value models as an accountability technique, up from 27 percent in the prior year’s study
    Marketing Management Analytics/Association of National Advertisers survey: Nov. 2009
  • Chief Marketing Officers top priorities in 2010
  • Top performance metrics 2010
  • Create a culture of marketing accountability
    • Start with the basic foundation
      • Measure, gain insight, optimize
    •   Align metrics to objectives
      •   Metrics need to support the organization’s business, marketing and communications objectives
    • Use a few relevant metrics
      • Don’t try to summarize in one overarching metric
      • And, don’t use every measurement you have
    •   Track both financial and non-financial metrics
      • ROMI is good.
      • Know the sources of marketing revenue & customers
  • Lifetime Value helps marketers to direct customer marketing strategy
    • What is Customer Lifetime Value (LTV)
      • The Net present value of the profit to be realized on the average new customer during a given number of years.
      • To compute LTV, you must be able to track customers from year to year.
    • LTV’s main use is evaluate acquisition and customer marketing strategies.
      • Marketers need to know the value of their customers, to properly target sales and retention efforts
      • LTV helps to determine how much a marketer can afford to acquire a new customer
      • LTV provides a way to segment during a customers lifecycle for up-sell, cross-sell, maintenance and retention of the most valuable customers
  • Marketers (and Agencies) need to show accountability & effectiveness, not just measurement
      • Everything has a Key Performance Indicator (KPI), but cross-channel activity makes measurement and attribution harder
      • Relevance
        • How marketing adds value to the business
      • Alignment
        • Proof that marketing is focused on the success of the business, not the size of its budget
      • Rigor
        • A fact-based, disciplined approach to strategy and execution
    • Without the above, Marketing gets The ROI Question
      • This is Finance’s way of asking “Can Marketing be trusted to spend the company’s money wisely?” 
  • Return on Marketing Investment – A measure of marketing effectiveness
    • Input
    • Promotion Cost $1,000,000
    • Average Sales $ 300
    • Profit Margin 25%
    • Total Prospects 250,000
    • Total Number of Sales 45,000
    • Return on Marketing Investment (ROMI)
    • Total Revenue $1,350,000
    • Total Profit $125,000
    • Cost per Prospect $4.00
    • Cost per Sale $22.22
    • Conversion Percent 18%
    • ROI (?) 12.5%
    • ROMI Incremental Revenue $1.35
    • ROMI Contribution Margin $ .125
  • Key Performance Indicators (KPIs) can help measure everything
    • 1. Business contribution:
    • Channel reach, revenue contribution (direct and indirect), Return On Investment (or ROMI), category penetration, costs and profitability.
    • 2. Marketing outcomes:
    • Customers, leads, sales, service contacts, conversion, retention, winback and response efficiencies. Acquisition cost, Avg. order, Avg. profit, Lifetime Value.
    • 3. Customer satisfaction:
    • Usability, performance/availability, recommendation behavior. Opinions, attitudes, reasons for defection, brand impact and churn.
    • 4. Customer behavior :
    • Profiles, customer orientation (segmentation), usability, clickstream and site actions. Bounce rates, conversions, page views, depth, page & site duration, RFM and transaction behavior.
    • 5. Channel promotion:
    • Attraction efficiency. Referrer efficiency, cost of acquisition and reach. CPM Vs CPC. Search engine visibility and link building. Unique visitors, frequency, e-mail marketing results. Channel integration.
    • 6. Social media:
    • Engagement (e.g. # of comments); involvement (e.g. time spent); bounce rate; # of reads, comments, & posts; brand affection/aversion; conversions; mention of brand name; advocacy; viral activity; referrals; recommendations; multiple moving averages; etc.
    1. Business contribution 2. Marketing outcomes 3. Customer satisfaction 4. Customer behavior 5. Channel promotion 6. Social Media
    • KPIs distill analytics data into relevant information
    • Exclusive to each business
    • Specific
    • Valuable
    • Actionable
    • Focus on the 3 – 5 most significant metrics
  • Once you measure, optimize. Testing and attribution
  • Construct a test plan
    • What are you testing
    • Why is it being tested
    • What audience segments are being tested
    • Describe the expectations for the test (e.g. Success, failure)
    • Identify the measures of success for the test
    • Are there risks associated with running the test
    • What are the internal resources required to run the test
    • Who are the stakeholders requesting the test
    • When are results needed?
  • Test Elements
    • Headlines
    • Sub-headlines
    • Body copy
    • Offers
    • Calls to action
    • Images
    • Colors
    • Landing pages
    • Product attributes
    • Bounce rate
    • Lead Forms
    • Testimonials
    • Price
    • Bonus offers
    • Guarantees
    • Video
    • Audio
    • Fonts
  • Two types of web testing
    • A/B testing (Split Testing)
      • Compares the performance of two different pages
      • Good when a web site has fewer than 1,000 page views per week
      • Can help when moving sections around or changing the overall look of web pages
    • Multivariate Testing
      • Compares the performance of content variations in multiple locations on a page
      • Good when a web site receives more than 1,000 page views per week
      • Can help optimize multiple content changes in different parts of multiple web pages simultaneously
  • A/B Split Testing Headline Image Offer Body Copy Test A Test B Headline Image Offer Body Copy Call to Action Call to Action Test one variable at a time
  • Multivariate Testing Headline 1 Image A Offer 1 Body Copy a Test A Test B Headline 2 Image B Offer 2 Body Copy b Call to Action I Call to Action II Test C Head line 3 Image C Offer 2 Body Copy c Call to Action III Test multiple variables at a time 3 6 Variables (3x3x3x3x3x3) = 729 Tests
  • Conversion optimization starts beyond the borders of your web site
  • Barriers to better attribution models include technology, resource, and process challenges
    • Most current attribution models are flawed
      • The last touch standard or current session models
      • Causes over-invest in near-term conversion drivers
    • The consumption and impact of media is interrelated with other media
      • Traditional media is interrelated with Digital media
      • The relationship between display and search changes depending on products, brands, time of day, season, company, geography, etc.
    • The multichannel effect is important in high-consideration situations
      • e.g. Expensive, complex or involved offerings
      • Financial services offerings, family vacation or a choice of college
  • Last ad standard Atlas Solutions, Microsoft Advertising
  • Engagement Mapping across channels Atlas Solutions, Microsoft Advertising
  • Social Media Relevant measures are being tracked, analyzed and used for program optimization & ROMI
  • Social commentary on Social Media AND “UPLOAD” PICTURES OF THEIR BREAKFASTS TO A “ FACEBOOK ” AND OTHER PEOPLE WILL LOOK AT THE BREAKFASTS AND MAKE COMMENTS SORRY TO BURST YOUR BUBBLE DUDES, BUT YOU ASKED. YES, THAT’S THE FUTURE! FUTURE MAN, I CAN’T BELIEVE PEOPLE WILL FIND THIS MORE INTERESTING THAN READING NEWSPAPERS OR WATCHING NETWORK TV!! SO YOU’RE SAYING PEOPLE WILL “ TWEET” WHAT THEY EAT” FOR BREAKFAST?
  • You Should Take Social Media Seriously
      • The amount of video uploaded to YouTube every minute
        • 20 hours
      • The amount of time it would take to view every video on YouTube
        • 650 Years
      • The number of YouTube videos viewed per day
        • 1 Billion
      • The average number of tweets on Twitter.com every day
        • 50 Million
  • You Should Take Social Media Seriously
      • The number of photos archived on Flikr.com as of June 2009
      • 13.6 Billion
    • The amount of content (Links, news, posts, notes, photos, etc. shared on FaceBook weekly
      • 1 Billion
    • The number of minutes spent on FaceBook daily
      • 8 Billon
    • If FaceBook were a country
      • It would be the 3 rd most populated in the world, behind China & India
      • The number of Articles on Wikipedia
        • 15 Million
  • CMO’s want social media measurement, but don’t do it Source: eMarketer.com
  • CMO’s are not tying results to objectives
  • Social Web Key Performance Indicators
    • Scale
      • Number of visitors, followers, fans, members, etc.; sources of traffic; quantity of comments about the brand, etc.
    • Involvement
      • Network/community numbers/quality, youtube and flickr views, time spent, frequency, geography, etc.
    • Engagement
      • Actions they take, read, post, comment, reviews, recommendations, etc.
    • Intimacy
      • Affection or aversion to the brand; community sentiments, opinions expressed, etc.
    • Influence
      • Advocacy, viral forwards, referrals and recommendations, social bookmarking, etc.
  • Five indicators of customer engagement
    • Memorability
      • Do they remember the communications and message
    • Favorability
      • Postive Sentimement Vs Negative sentiment
    • Purchase Consideration
      • More or less likely to purchase after exposure
    • Time Spent
      • Postitive correlation between time spent and purchase consideration
    • Cognitive and Emotional Response
      • Understand and feel good about the messaging
  • Alterian’s Social Engagement Index 2010 Super Bowl TV Ads www.alterian-social-media.com/
  • Alterian’s Social Sentiment Index 2010 Super Bowl TV Ads www.alterian-social-media.com/
  • How much is a tweet, a fan or follower worth? www.alterian-social-media.com/
  • Staff needs to be a Swiss Army Knife
    • Business savvy
    • Planning confident
    • Creative thinkers
    • Implementation skilled
    • Optimization focused
    • Analysis enthusiast
  • Conclusions
    • Marketing accountability is among CMO’s top priorities for 2010
    • Testing and optimizing ads provides a way to improve performance for online and offline ads
    • To prove marketing effectiveness, KPI’s must be aligned with organizational goals and have indisputable rigor
    • Attribution modeling is difficult, often flawed, but essential in a world of multichannel marketing communications
    • There are a growing number of measures for social marketing, if only marketers and agencies would use them
    • Staffers for tomorrow’s marketing communications will multidisciplinary, a veritable Swiss Army knife of capabilities
  • Questions & Answers Questions?
  • Thank You! [email_address]