The 2011 marketing forecast by Ad-ology Research presents insights from Chief Marketing Officers (CMOs), small-to-midsize business (SMB) owners, and U.S. consumers regarding their perspectives on advertising and marketing trends for the year. CMOs express cautious optimism about marketing budgets, while SMBs indicate a focus on digital media, with social media being a top spender. Consumer insights reveal changing attitudes towards advertising effectiveness and a desire for relevant marketing that resonates with their values.

1. 2011 MARKETING FORECAST C. Lee Smith Ad-ology Research, Westerville, Ohio

2. WHO IS AD-OLOGY? Ad-ology provides research to more than 2,000 agencies, marketers and media properties. We study the impact of advertising+marketing on purchase, forecast future marketing, and study ways for clients to “ advertise smarter .” Launched in 2005. Parent company founded in 1989 in Columbus, Ohio. One of five Research Partners for 2010 AAF National Student Ad Competition.

3. 2011 MARKETING FORECAST FROM THE PERSPECTIVE OF… CMO SMB CONSUMER

4. 2011 MARKETING FORECAST What the Chief Marketing Officer Says

5. In January 2011, Duke University asked 421 Chief Marketing Officers for their thoughts. Respondents must meet two (2) criteria: Title: CMO, Director level or above Companies in Forbes Top 1000, CMO Club or AMA Members ABOUT 2011 MARKETING WHAT THE CMO SAYS

6. ABOUT 2011 MARKETING Optimistic, but now more cautiously so. WHAT THE CMO SAYS CMO Survey, February 2011, Duke University/AMA (n=421 CMOs)

7. ABOUT 2011 MARKETING WHAT THE CMO SAYS CMO Survey, February 2011, Duke University/AMA (n=421 CMOs)

8. ABOUT 2011 MARKETING WHAT THE CMO SAYS CMO Survey, February 2011, Duke University/AMA (n=421 CMOs)

9. In January 2010, we asked 363 agency clients for their thoughts. Respondents must meet four (4) criteria: Title: CMO, VP/Director of Marketing, CEO Companies over $2 million in sales Must employ at least 1 outside agency Must be primary decision maker or one of the primary decision makers Results featured in ADWEEK several other national trade publications ABOUT AD AGENCIES WHAT THE CMO SAYS

10. Other than budget, what are your company's top five factors for selecting a new agency? (out of a list of 15 factors) Quality of previous work (54%) Creative capabilities (54%) Industry experience (46%) Responsiveness (44%) Do they understand our customers? (43%) Attitudes on Advertising Agencies, January 2010, Ad-ology Research (n=363 CMOs) ABOUT AD AGENCIES WHAT THE CMO SAYS

11. What are the biggest sources of frustration or aggravation with your agency/agencies? (out of a list of 15 factors) The top four by far are: Poor communication (38%) More reactive than proactive (37%) Lack of understanding of our company's business or industry (37%) Lack of strategic thinking (31%) Attitudes on Advertising Agencies, January 2010, Ad-ology Research (n=363 CMOs) ABOUT AD AGENCIES WHAT THE CMO SAYS

12. 2011 MARKETING FORECAST What the Small-to-Midsize Business Owner Says

13. In November 2010, we asked 752 SMB owners in the United States for their thoughts. Respondents must meet three (3) criteria: Title: CEO, Owner, VP of Marketing/Sales Companies less than 100 employees Must be primary decision maker or one of the primary decision makers ABOUT MARKETING IN 2011 Results featured in USA TODAY, Inc. Magazine, Others WHAT THE SMB SAYS

15. Biggest budget gainers... Direct Response (24.9% will spend more) Newspapers: Daily/Sunday (19.2%) Newspapers: Weekly/Suburban (18.7%) Local Television (17.0%) Trade Publications (16.5%) Not in the Top 5 Gainers: Cable TV, Yellow Pages, Radio, City/State Magazines, Out-of-Home, Coupon Books, Cinema Advertising. Source: 2011 Small Business Marketing Forecast, Ad-ology Research (n=752 SMB Owners) ABOUT TRADITIONAL MEDIA SPENDING IN 2011 WHAT THE SMB SAYS

16. Top 5 frustrations SMBs have about the process of buying advertising from media companies... Rate increases without justification or audience increases (54.0%, up from 51% in 2010) Not having enough budget to buy what works best (45.4%) Getting ad proposals that are not relevant to your business (44.5%, up from 37%) Being able to justify cost/measure success (41.6%, up from 35% in 2010) Ratings/Research that is confusing, outdated or misleading (39.4%, up from 31%) 2011 Small Business Marketing Forecast, Ad-ology Research (n=752 SMB Owners) ABOUT BUYING ADVERTISING IN 2011 WHAT THE SMB SAYS

17. Biggest budget gainers... Social Media (39.4% will spend more in 2011) Email Marketing (33.8%) Online Display Advertising (27.3%) Search Engine Advertising (24.6%) Daily Deals (20.9%) Mobile Apps or Advertising (20.9%) Not in the Top 5 Gainers: Blogging, Ecommerce, Online Video, Podcasting 2011 Small Business Marketing Forecast, Ad-ology Research (n=752 SMB Owners) ABOUT DIGITAL MEDIA SPENDING IN 2011 WHAT THE SMB SAYS

18. ABOUT SOCIAL NETWORKING IN 2011 2011 Small Business Marketing Forecast, Ad-ology Research (n=752 SMB Owners) WHAT THE SMB SAYS

19. 51.0% believe social media is over-hyped 51.1% believe “advertising doesn’t seem to work as well as it used to” 37.8% DISAGREE that daily deals are a good way to develop new, long-term customers 83.4% believe their “company must be one of the first 2-3 that come in mind…” 88.6% believe “targeting customers by what they think, feel and value is more effective than by demographic” 2011 Small Business Marketing Forecast, Ad-ology Research (n=752 SMB Owners) ABOUT MARKETING IN 2011 WHAT THE SMB SAYS

20. Less than a third of SMBs budget a % of sales revenue for advertising 87.5% say “ salespeople talk too much about how great their products are instead of what they can do for me. ” 76.5% answer business email or use the Internet “late at night for business purposes” 39.9% attended a networking event outside the office in past 12 months Lunch is still the best meal to conduct business over ( 69.3% , second is breakfast at 12.0%) 2011 Small Business Marketing Forecast, Ad-ology Research (n=752 SMB Owners) ABOUT WORKING WITH YOU IN 2011 WHAT THE SMB SAYS

21. The best time of the day to meet with advertising/marketing people or take their calls is… 2011 Small Business Marketing Forecast, Ad-ology Research (n=752 SMB Owners) ABOUT WORKING WITH YOU IN 2011 WHAT THE SMB SAYS

22. The best day of the week to meet with advertising/marketing people is… 2011 Small Business Marketing Forecast, Ad-ology Research (n=752 SMB Owners) ABOUT WORKING WITH YOU IN 2011 WHAT THE SMB SAYS

23. 2011 MARKETING FORECAST What the Consumer Says

24. In January 2011, we asked U.S. consumers about their purchase intent, lifestyles, and attitudes on advertising. Sample size was 2,226 US Adults Nationally representative Margin of error: +/- 2.2% Results reported by 500+ different advertising/media audiences Here are a few of the highlights from this study for the general US population... ABOUT THEIR PLANS FOR 2011 WHAT THE CONSUMER SAYS

25. New car/truck ( 18.6% , up from 16.7% in 2010)* New home ( 8.9% , up from 5.7%) New bed or mattress ( 19.0% , up from 14.8%) Diet/Weight Loss Program ( 9.7% , up from 6.3%) LASIK procedure ( 4.8% , up from 2.6%)* Vacation inside the US ( 52.8% , down from 54.7%)* New jewelry or a watch ( 19.1% , down from 23.8%) *within margin of error +/- 2.2%. 2011 Audience Interests+Attitudes, Ad-ology Research (N=2,226 US adults) Here are a few of the intended purchase plans for the general US population... ABOUT THEIR PLANS FOR 2011 WHAT THE CONSUMER SAYS

26. 1. Comfortable (62.3%) 2. Healthy (55.5%) 3. Relaxed (44.6%) 4. Safe and Secure (36.6%) 5. Productive (33.3%) 6. Fun (31.6%) 7. Successful (30.9%) 8. Attractive (30.3%) 9. Intelligent (28.3%) 10. In control (27.4%) Chosen from a list of 30 emotions. 2011 Audience Interests+Attitudes, Ad-ology Research (N=2,226 US adults) In the next 12 months, I want to buy products/services that make me feel… ABOUT THEIR PLANS FOR 2011 WHAT THE CONSUMER SAYS

27. ABOUT ADVERTISING 2011 Audience Interests+Attitudes, Ad-ology Research (N=2,226 US adults) WHAT THE CONSUMER SAYS Statement Agree Disagree Whenever I see/hear a local business advertising frequently, they must be doing well 58.6% 41.4% Whenever a local business that used to advertise heavily suddenly stops, they must be hurting 50.0% 50.0% Stores that advertise are typically better than those who do not advertise 38.2% 61.8% I am willing to sacrifice some privacy to get ads that are relevant to me 32.6% 67.4% Advertising only drives up the cost of prescription drugs 63.2% 36.8% Advertising is not as creative as it used to be 47.6% 52.4%

28. Audience Interests+Attitudes, Ad-ology Research, 2010 (n=2111) US ADULTS WHO HAVE TAKEN ACTION AFTER SEEING/HEARING AN AD (ALL-TIME) 2010 WHAT THE CONSUMER SAYS

29. Audience Interests+Attitudes, Ad-ology Research, 2011 (n=2,226) US ADULTS WHO HAVE TAKEN ACTION AFTER SEEING/HEARING AN AD (ALL-TIME) 2011 WHAT THE CONSUMER SAYS

30. Audience Interests+Attitudes, Ad-ology Research, 2010 (n=2111) What the Consumer Says US ADULTS WHO HAVE TAKEN ACTION AFTER SEEING/HEARING AN AD (PAST 30 DAYS) 2010

31. Audience Interests+Attitudes, Ad-ology Research, 2011 (n=2,226) What the Consumer Says US ADULTS WHO HAVE TAKEN ACTION AFTER SEEING/HEARING AN AD (PAST 30 DAYS) 2011

32. Today ’s Take-aways Many B2C Product Marketers plan to get aggressive. Others may not be totally sold on economic recovery. Traditional advertising budgets should be increased for the first time in years. Digital marketing budgets continue double-digit growth. Interest in social media is growing steadily. Brand building is back! Agency clients say they ’re frustrated with reactivity, lack of insight and strategic thinking. WHAT THE CMO SAYS…

33. Today ’s Take-aways We’re optimistic despite having limited budgets. You can’t know what best for our business until you KNOW our business and our customers. We want to be better at targeting our best prospects – including psychographics. We’re ready to try new things like mobile, video, social, check-ins, and daily deals. We dislike outdated, biased or misleading research from media companies. Don’ t ease into the week or quit at 5. Email at night, call on Mondays (maybe even the weekends). WHAT THE SMB SAYS…

34. Today ’s Take-aways We’re spending again, just not extravagantly. Automotive and Residential Real Estate are poised to pick up in 2011. Advertising can still be very effective in leading people to call, click, search, visit a business or influencing purchase. Cutting back on advertising is bad as it sends a message of uncertainty. Noticeably increasing advertising is good as it sends a message of strength. Internet Display, Email now causes customers to take action more than some traditional media. WHAT THE CONSUMER SAYS…

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