Next Generation Media Mix OPtimization.pdf

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  • 1. Next Generation Media Mix OptimizationUsing audience and media management to create certainty inan increasingly uncertain world
  • 2. WHITE PAPERExecutive Summary:People have more media choices than ever to research the products and services they buy. CMOs arechallenged to rationalize their budgets and demonstrate increasing ROI while embracing new media anddistinguishing the media consumptions of their customer. Next generation media mix optimization is howwinning marketing organizations will allocate their investments to target high-value audience and media options,while delivering accurate attribution, cross channel measurement and tools for high-performance planning.Like clockwork, each year marketing organizations providemarketing plans and budget recommendations that outlinesophisticated media investments, spanning a growing number ofchannels — chasing an increasingly fragmented customer andillusive return on investment.The world is more complex. Your company’s audience — your existing and prospective customers — have changed andso must your marketing. Consumers are connected to a greater array of devices and media outlets than ever before.They Twitter and browse social networks on smart phones, check email in their local coffee shops, and choose from over100 TV channels every day1. They seek and use information: 51% of U.S. and UK consumers always compare productsand services before a purchase; only 5% rely upon advertising or promotional features for advice2. In this cacophony ofchange, 80% of CEOs believe their brand delivers a superior customer experience yet only 8% of their customers agree3.And, only one in five “targeted” online ads actually reaches its intended audience4. • Are your media investments delivering against the promise of return on marketing investment? • Can you identify and target the appropriate audience using the most efficient media tools? • Can you properly attribute and track marketing efforts across media investments? • Are you better than your competitor at optimizing a sophisticated media mix?These are very difficult questions. Gaps in answers create immense issues: Waste — 47% of U.S. ad spend reaches thewrong audience5. These gaps in delivery accuracy mean that when marketers can’t align their target audience strategyclosely to their ad delivery, they make investment decisions based upon averages and educated hunches, causing themto overspend on low value customers and media channels while under spending on the high value ones. Given the top30% of a brand’s customers are typically five times more profitable6, the inability to create certainty in audience andmedia management costs advertisers huge profits.To address these challenges, many companies are turning to the next generation in media mix optimization, deliveringhigh-performance audience and media management. Designed to optimize the performance of media mix investments,the solution takes the guesswork out of planning — helping marketers to better orchestrate and execute theirmarketing strategy.NEXT GENERATION MEDIA MIX OPTIMIZATION 1
  • 3. WHITE PAPERChallenges to effectivemedia mix optimizationToday’s chief marketing officer is tasked to deliver incremental customer is a static average. The reality is thatincreasing results in the face of decreasing or flat budgets, only 30% of customers typically return a profit, yet cost aswhile also adopting and embracing technology changes much to acquire as the 50% that are profit-neutral, or thethat influence consumers. Here are some of the key 20% that actually cost you money to service. To significantlychallenges: increase your ROI, consider the impact of customer value and target your best customers first.Existing media mix optimizationsolutions break on several levels Legacy sources for media mix optimization — WhileWhile nearly all top marketing executives have used or advertising agencies and consultants have driven mediaresearched solutions in this area, there are many who optimization solutions for many years, there are issueshave not experienced success or have seen that success to consider:wane in recent years. • Advertising agencies can present an improper alignment of business objectives and tend to focus onLegacy nomenclature — The delineation between the channels of their expertise. This is natural as theirtraditional mass advertising (ATL – Above the Line) and talent also pools around those areas of expertise.promotional or addressable-based advertising (BTL – And, while primarily done through test programs,Below the Line) efforts is blurring. The continued increase the connection to actual consumer behavior andin media addressability is delivering new opportunities, correlation to revenue lift is usually soft, at best.like household based television commercials driven • Econometric models have long been used but invariablyfrom advertiser segmentation and data insight. While rely upon superhuman leaps in assumptions andoptimization efforts tend to focus on either ABT or BTL, in footnotes in their reports to achieve their mathematicalthe end, one consumer is the same person whether they summations. Also, they tend to focus on either ATLview a TV commercial or receive a display advertisement. or BTL programs, limiting their effectiveness to driveAnd, they see your brand as one entity… regardless of performance and attribution, while fragmenting the vieworganizational and technological silos. of current and future customers. Differentiated Today, digital media accounts for nearly 35% of the customer value average U.S. consumer’s media consumption yet less Profitable — The key to real than 15% of ad spend is directed toward these new 30% optimization is to channels7. Successful media mix optimization solutions reduce wasted ad need to drive consolidated answers for BOTH above the impressions on two line and below the line investments. Your target audience Neutral dimensions: audience doesn’t know that “line” exists and transcends channels 50% and media channel. with the greatest of ease. The struggle for marketing One of the most leaders seeking to optimize against this new reality is to difficult assumptions find models adaptive to the rate of change that drive shifts Loss 20% of existing media mix in media investment and more closely mirror the shifts in optimization solutions media consumption of their target audience. is that the value of an2 NEXT GENERATION MEDIA MIX OPTIMIZATION
  • 4. WHITE PAPER US Adults (millions) Fast-forward to the current decade. Today’s 250 All US Adults teen has become a moving target. Nearly all are double or triple tasking while watching TV. Mobile Phone 200 Internet U.S. teenagers trust information from each Camera Phone other 5X more than adults and 10X more than 150 ads11. If you think about what this world looks Laptop like 5 to 10 years from now, this scenario will MP3 Player 100 Digital Still Camera be even more complex as this demographic will be your future target. It will pay to get on Satellite Radio Portable Navigation 50 Device top of this challenge sooner than later. Activities US Teen Influencers* Are Doing 0 Simultaneously While Watching TV, May 2010 Actual Forecast (% of respondents) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Texting/spending time on mobile phones 88%Source: July 25, 2008, “Benchmark 2008: Forecast Growth of Devices And Access In The US” reportNote: Actuals from 2005 and earlier are adjustments based on surveys of household heads. Spending time online 79% Doing homework 50% Note: *top 15% most active and engages myYearbook Members “Reaching” consumers has become more difficult Source: myYearbook and Ketchum, “Social Media Teen Influencer Survey,” provided to eMarketer, May 25, 2010 The challenge has increased exponentially. There are more 116033 www.eMarketer.com channels, more screens and more data than ever and the rate of change is increasing. Adoption driven by accessibility Complicating this, pushing more “noise” at consumers and affordability, technology enables consumers to access who have become increasingly insensitive to the charms a vast wealth of information, on their terms. Starting in the of marketers has proven to risk exacerbating the issue and last few decades, the trajectory of change has ramped up drives negative long term brand impressions. fast and is not projected to slow down. The solution: Next generation media mix Selecting one of the top spend channels, TV, we can optimization see dramatic intra-channel shifts: From a peak year in Next generation media mix optimization seeks to develop mass TV advertising, 1965, until 2002, the number of a causal relationship between consumers, segments to 60-second spots necessary to reach 80% of one’s target response, and to drill down into which media mix actually audience has increased from three to 1178. Translating this drives consumer behavior for your high value audience. to trust and recent research surrounding brand message It reduces the guesswork through better attribution; acceptance, 60% of respondents said they need to hear quantifying media mix decisions through causal channel information about a company three to five times before contributions to sales. The solution is designed to they believe it9. Correlating these two points, an advertiser eliminate misleading performance measures and align the would need to provide at least 351 60-second TV spots marketing organization through common goals. to provide sufficient TV exposure to satisfy 80% of one’s target audience need for message acceptance. This, all while nearly 40 million U.S. households have DVR capabilities and 59% of them “currently use a DVR to skip through the commercials.”10 NEXT GENERATION MEDIA MIX OPTIMIZATION 3
  • 5. WHITE PAPERStart with your best customersOf finer resolution than your target audience, Incremental Revenue People, Process &determine those customers who tend to buy more, Opportunities Technology Media Spendbuy more frequently, return less, and refer you to Incremental Sales Current Base Costs –/+ Above the Line Spend – x Scale Efficiencies (Build vs. Buy) Media Arbitrage Opportunitiesothers more — those top 30% of your customer Operating Profit (%) + + Incremental Spend Required Incremental Direct Marketing Spend Economicbase who deliver 100% of your profitability. Pricing: Direct Marketing Spend: Value People, Process and Email Executiion, Direct Mail,Determine what this elite class looks like — Proposition + Technology + Banner Purchases, etc. EVP = Levers for Improvement Levers for Improvement Levers for Improvementdemographics, purchase habits, media habits, • Touch points • Engagement factor • Consolidation • Collection • Map media buys to the best customer demographics • Marketable universe • Virtualization • What data is availabledecision process — and how you can acquire more • Response rate • Conversion rate • Standardization • Severance expense on rate cards? • Do sponsorships align with • Shopping basket value customerbase?of them. • PersonicX value overlayTop down and bottom upThe resulting analytics should include both ATL Economic value propositionand BTL data in a holistic model. Driven from a steeped Through elimination of media wasted on the wrongunderstanding of your best customer portrait, you can audience or mix of channels, a successful media mixthen use syndicated segmentation methodologies and optimization program should cover at least the cost of“look alike” analysis to drive acquisition media decisions, incremental resources. Sure, this is a worst case scenarioin particular those above the line. While the value of a but given the pressure on cost containment and hurdlescustomer is not static, neither are their needs, desires, for justification, this is the safest decision for today’s CMO.demographics, attitudes or behaviors. It’s not aboutcustomer averages or the mean, but adding a level of Put tools in the hands of decision makersintelligence and insight. Planning tools — Rather than a static report in a dynamic market, you need to be able to adjust and formUsing historic media placement data, company sales recommendations based upon your planning cycles andhistory and third-party demographics, your statistical needs. Three degrees of resolution you should consider:model should be agnostic to the legacy view of the • Media type (e.g., TV, radio, print or online)advertising “line”. This approach delivers several • Marketing channel (e.g., email, direct mail postcards,incremental benefits; etc.) • Attribution problems become less of a concern as • Region (metro, state, country, etc.) the full picture of media consumption is viewed by “What if scenarios” — Marketers are seldom happy a single model. You see the overlapping effects of with inflexible rationale. Instead, consider the impact of alternate channels rather than the internal flurry of tools that allow you and your team to examine “what- discussion seeking to claim “last click” ownership. if” scenarios to understand how constraints impact the • Current shifts in media consumption tend to favor media mix and campaign outcomes by accounting for BTL, digital channels yet concurrent monitoring parameters such as budgets, partner obligations, regional alleviates the need for constant tweaking of the investments or revenue mandates. underlying analytics.4 NEXT GENERATION MEDIA MIX OPTIMIZATION
  • 6. WHITE PAPERValidation reporting — Media mix optimization solutions The Acxiom advantageare only as helpful as the validity of their predictions. Next generation media mix optimization is crucialConsider the need for a system of self checking for marketing organizations to meet their businessthe accuracy of your optimization model and its’ objectives. Winning marketing teams will target theirrecommendations by testing and measuring initial results investments toward high-value audiences with theagainst objectives. Incremental adjustments will increase right media options. With more than 40 years ofvisibility, accuracy and ROI. global marketing experience across all industries, Acxiom is the partner of choice for those who want toIt’s a journey impact their bottom line.Start with bit-sized chunks, the building blocks; don’ttry to boil the ocean. Begin as a self-funding practice With offices in the United States, Europe, thethrough a crawl, walk and then run with your differentiated Middle East, Africa and Asia-Pacific, Acxiom iscustomer strategy, revving the engine of your new media well-equipped to meet the global needs of our clients.optimized machine. Like any journey, you’ll need a Start improving your marketing ROI, let Acxiom bedestination and roadmap to guide your way as you deploy your guide.the appropriate engagement strategies and tactics whilebalancing customer demands and organization goals. To learn how Acxiom’s media mix optimizationThroughout the journey, you’ll identify ways to reallocate solutions can increase marketing ROI and reducebudget from less profitable media channels to other, more budget waste, call 1.888.3ACXIOM (1.888.322.9466) profitable ones as you measure and refine your tactics. or visit www.acxiom.com/consulting.NEXT GENERATION MEDIA MIX OPTIMIZATION 5
  • 7. WHITE PAPER1 Nielson, 20082 Alterian ““Your Brand: At Risk? Or Ready for Growth?”, 20103 Bain & Company, “Closing the Delivery Gap”, 20054 Comscore, 20095 Rex Briggs and Greg Stuart, ”What Sticks: How most Advertising Fails and How to Guarantee Yours Succeeds”, 2006, Kaplan Publishing6 Acxiom, average customer analysis7 Forrester Research, 20098 Tim Stengel, former CMO at P&G9 Edelman Trust Barometer, 200910 eMarketer — Mintel, “Attitudes toward Traditional Media Advertising and Promotional marketing — US”, 200911 eMarketer — Deloitte, “State of the Media Democracy Fourth Edition: Select US Highlights”, 2009
  • 8. See how Acxiom can work for you. For more information, visit our websiteat www.acxiom.com/consulting or call: 1.888.3ACXIOM AC-0348-10 ELEC 6/10