The Elusive Definition of Marketing ROI

July 20th, 2004

Interesting, although rather predictable, were the results of an exclusive survey on the marketing accountability and ROI released by the Association of National Advertisers (ANA) and Forrester Research yesterday.
Jim Nail, Principal Analyst at Forrester Research, discussed the results at ANA's Marketing Accountability Forum, which took place at The Grand Hyatt in New York. Adrants sums up:

The survey of 54 ANA members revealed a lack of consensus among marketers on how to measure/define their return on investment (ROI) in marketing. Some 78% cited measuring the sales impact of marketing as somewhat/very difficult. In addition 70% said gaining agreement on the definition of ROI as somewhat/very difficult.

When asked for the definition of "marketing ROI," answers where all over the place:
Incremental sales revenue generated by marketing activities – 66%
Changes in brand awareness – 57%
Total sales revenue generated by marketing activities – 55%
Changes in purchase intention – 55%
Changes in attitudes toward the brand – 51%
Changes in market share – 49%
Number of leads generated – 40%
Ratio of advertising costs to sales revenue – 34%
Cost per lead generated – 34%
Reach/frequency achieved – 30%
Gross rating points delivered – 25%
Cost per sale generated – 23%
Post buy analysis comparing media plan to actual media delivery – 21%
Changes in the financial value of brand equity – 19%
Increase in customer lifetime value – 17%
Other – 4%
None of the above – 2%
Why does that not surprise me…?

Disappearing channel scarcity

July 19th, 2004

Seth Godin writes about his conversation with a friend in TV business. I find it interesting as it reflects the mindset of the TV industry and probably explains their current situation:

Twenty years ago, everyone in the TV business believed in the three channel universe. Cable was a myth. That's why the big networks did such a bad job of starting cable networks. They couldn't believe that it was even remotely likely to succeed.
It took about a decade, but the tv business recalibrated. They now believe that we have reached the natural number of networks and that's it.
What happens, I asked, when Tivo has Java and TCP/IP and there's a million channels?
The people in the TV business can't imagine this. They can't imagine a world where there might be 20 A&E networks, or where there might be a channel just for shows on how to build a model airplane.
XM radio and the Net just increased the number of radio stations by a factor of 100.
And today the NY Times reports that 175,000 books are published every year. And rising.
And we just hit 3,000,000 blogs, up from 100 five years ago.

And now for the future:

The number of channels for just about anything keeps going up. The number of GOOD channels, where good means a built in high traffic audience that is non-discerning, keeps going down. The number of good newspaper PR outlets is down to a handful. The number of retailers with shelf space that really matters is tiny. Yes, you can get your thing out there. No, you can't expect that distribution (or carriage, as they say in TV) is going to make you successful.
In other words, owning a printing press is not such a big deal. Knowing the buyer at Bed Beth & Beyond isn't much better.

Is that the sound of channel proliferation or is it the sound of TV business people straining to keep up. :-)

The colour of profit

July 17th, 2004

There are people who think official color reassignments are a conspiracy theory. Teresa Nielsen Hayden of Making Light blog has the short answer is that they are a conspiracy, but they aren’t theoretical, and submits as evidence the assigned colors for 2004, 2003 and 2002.

Who does this to us? An outfit, founded in 1962, called the Color Marketing Group. These are the people who wished avocado green and harvest gold kitchen appliances on America, and put the 1980s into those mauve-pink shades that looked so peculiarly horrible on so many of us.

The CMG is a trade organization that houses 1,500 members from varied industries. The set the long-term colour trends (a set of sixteen colors that will be profitably marketable two years hence) as well as short-term predictions (a palette of colours that are supposed to be currently ‘in’) at twice-yearly meetings in Alexandria, VA.

It’s a self-fulfilling prophecy. Nobody’s obliged to follow CMG’s lead; but a manufacturer who ignores them is likely to find that all his competitors’ products are in fashionably compatible colors, while his own clash.

How do CMG members choose new colors? As someone explained in Slate back in 1998,

The official line is that they look at economic trends (pastels in bad times, saturated colors in good times) and also examine social trends. What this boils down to is six hundred people sitting around in small groups, trying to figure out the next big thing. Gray, for example, was chosen in part because of the craze for technology and space-age stuff as the millennium approaches: “People associate gray with futuristic things like silvery metallics and anodized aluminum,” a CMG spokeswoman said. And why blue? “Water is a big social issue, what with the current emphasis on designer water and water conservation.”

It all fits together for Teresa:

I knew what was up with the big khaki push. Remember that one? Ads everywhere saying “Hemingway wore khaki”? We’d all been wearing black for several years. We had black levis, good black skirts, black leather or denim jackets, little black dresses?a great installed user base of basic black clothing, plus the colored stuff we wore with it. I hadn’t heard anyone sighing for the return of khaki, and if I had, I’d have pointed them to one of the WASP mail-order catalogues. What’s the big deal with khaki? It gets dirty too easily, and for a lot of people it’s an unbecoming color. But there’s only so much new black clothing you can sell a happy consumer who already has a closet full of black-and-coordinates; so the clothing industry pushed khaki remorselessly.

That would explain the fashion magazines seasonal frenzy, when ‘yellow’, ‘pink’ or ‘green’ are the ‘new black’. Why is this relevant to engagement marketing? Such trend-setting engages customers by fashionista’s fiat, that is, not at all. It may be true that colour fashion changes every season and every season we are being told this colour scheme is the ‘thing’. However, I wonder how many people actually bother to change their wardrobes, interiors and other items according to the latest CMG ‘soothing’ blurb.

Even Longer Goodbye

July 13th, 2004

P&G bankrolled commercial television and was the biggest spender on broadcast advertising.
But P&G have realised that this dinosaur of a business model is no longer financially tenable. That the costs of marketing are rising whilst the effectiveness of that activity is significantly reduced. Damaging the profitability of the company.
Furthermore, P&G are changing the way they compensate agencies. Once upon a time it was a percentage of the media spend. But today it is about performance. This means agencies are paid less if they fail and more if what they deliver drives sales success.
Stengel also talks about engaging customers and this is achieved I believe by providing context and meaning around marketing strategies. For example, services which are relevant and that are 'Just in Time' rather than 'Just in Case'. This is as relevant to retailers as it is to FMCG and SMCG (slow moving consumer goods), telecoms and financial services to name but a few.
However this requires a rethink of how companies market themselves and how they go to market. And this focus is all about creating value and putting the customer at the beginning, not the end of the value chain. It neccessitates a move from push to pull marketing.
But what is value? Value creation is whatever will drive your customers to willingly buy your products and services, and for them to want to repeat the exercise over and over again. That may be a service, product innovation, community driven activity. Think Apple iPod.
When Tesco's introduced their loyalty card they were at the time the biggest spender on UK TV broadcast advertising. A year later advertising spend had been slashed by 90%. The Guinness visitor centre in Dublin or Twins mobile phone service from Hong Kong are all examples of how businesses can engage their customers.
This new approach will deliver ROI through the marketing budget. Equally this means that operations and marketing must work together to deliver value more precisely. Which will drive down operating costs and cost effectively increase sales. The low cost airline Go is a great example of this or more recently Thomas Cook TV. Who shift £150m of inventory on a £2,5m operating base. 92% of the people that buy a Thomas Cook holiday in this way have never bought a Thomas Cook holiday before.
Stengel says:

The number of brands and messages competing for consumer attention has exploded, and consumers have changed dramatically. They show an increasing lack of tolerance for marketing that is irrelevant to their lives, or that is completely unsolicited. Traditional marketing methods are diluted by a hurried lifestyle, overwhelmed by technology, and often deliberately ignored.

It is for these very reasons businesses need to move from an interruptive model of marketing to one of engagement. Businesses need to create innovative engagement marketing strategies that deliver real value to the customer.
via Adverblog

The Long Goodbye or Are You Talkin’ to Me?

May 15th, 2004

Finally I have got round to responding to this article written by Nick Kettles
When the Chartered Institute of Marketing produces a report "You talkin to me? Marketing Communications in the age of consent."
One knows that things in the world of business and marketing communications are changing.
For example; The average cost of making a new Hollywood movie went up 8.6% in 2003. The average cost of marketing a new Hollywood movie went up 28% in 2003. Yet audience numbers FELL by 4% in 2003. As ticket prices grew 4%, Hollywood box office revenues remained at $9.5B in the USA in 2003. Financial Times 24 March 2004.
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Blogging the Observer

April 5th, 2004

It was an interesting read, in Sundays Observer on blogging. Yet it seemed that the point was missed about the true nature and capability of blogging. The focus seemed about the egotistical nature of blogging, which is not wrong however, blogging has so much more to offer.
The ability to reach out and share information to communities of interest. ie. gaming, large companies, political commentators all can use the blog as powerful mediators of information.
There are Eleven Types of Company that Need a Blog

  1. Companies with on-line business model or strategy
  2. Companies relying on constant stream of information
  3. Companies with agenda (charities, associations, interest groups)
  4. Companies whose sales depend on general awareness and information reaching their customers
  5. Companies relying on customer feedback for the development of product and services
  6. Companies whose products inspire discussion, enthusiasm, natural following and communities
  7. Companies with something to say that cannot easily be said by their PR departments
  8. Companies that need direct communication (e.g. in crisis time)
  9. Companies that want to join discussions about them
  10. Companies that want to generate credibility (linking/being linked to industry sources)
  11. Companies with niche customers (aggregation of alternative, non-mainstream demand, preferences)

It would have been interesting to have had more information on these topics.

Its life, but not as we know it

April 2nd, 2004

The changing retail high street

By Alan Moore, Ross Sleight, & Axel Chaldecott
As a child, I remember experiencing the strange but curiously wonderful smell of the tobacconist, or the lure of the sweetshop, with its dark wooden counter and rows and rows of exotic jars of sweets. Or, the practical fascination of the hardware store, or the cavernous furniture store. Each, had their own sense of adventure, each had their own myth.
Every town had a high street. The retail high street in a way defined our growing communities. Cementing our physical sense of place. They were more powerful and unique as they were the only available source of supply, both in terms of goods and knowledge. We, as a closed community valued our community stores for the value they offered.
Our retail high street has changed, offering more goods, more choice, as our society has evolved, as we have become more mobile, and economically independent. The high street has also lost the unique sense of value connected to place. Brands have overtaken the high street. But what brands do and how customers use them is also changing. And few are keeping up with the pace of change.
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Mobile Marketing. How to succeed in a connected Age

March 11th, 2004

Expanding Time, Expanding Experience, Expanding Me
An overview of mobility and its potential for businesses and brands.
This article was commissioned by the Marketing Society Journal for inclusion in March 2004

By Alan Moore and Tomi Ahonen
During the TV show American Idol, more than 7.5 million American-Idol texts were sent during the contest. The final was the largest single text-messaging event handled by a mobile phone operator in the world, and a third of the senders had never texted before. American Idol had provided a reason for non-texters to adopt. This US phenomenon is even more exceptional when one considers that the culture of use and penetration of the mobile phone is not
comparable to Europe, particularly the UK and the Nordics.
And it is not 'Reality TV' that is the big idea as so many think it is, it is in fact 'the interactivity of participation', or 'engagement', that is the central driver to the success of these shows significantly enabled in part by the mobile phone.
The mobile phone and the entire concept of mobility has impacted on our culture and goes deep into the human pysche. This is the precise opposite to a world without the mobile phone. Now, you find out what's going on through your mobile phone, and go to the place where it's happening. How many of us feel bereft when we have lost, mislaid or forgotten our mobile phone? The mobile phone enables us to swarm, to graze and move towards our most potentially meaningful experiences at will. As a consequence the mobile phone is a powerful mediator in the rise of the 'experience economy'.
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How the Marketing Money Goes Round

February 22nd, 2004

by Alan Moore (SMLXL) & John Nolan

A television broadcaster is a casino, and it plays by house rules. Rule number one ? the house wins.
Here's how it works. A brand wants to advertise, it needs to hit a key demographic, but it also needs those eyeballs by the bucket load. A broadcaster needs that brand's money. The broadcaster gambles on developing content which will attract enough of the right eyeballs so that it can unlock the brand's money. The gamble is that the cost of the programming across the entire schedule will be more than matched by spend of the brands through advertising and sponsorship. Historically in the commercial sector the house has always won. There has always been enough cash left after it has paid for the content for the broadcaster to pay shareholders, dividends and bonuses.
From a broadcaster's cost point of view, they have always kept content producers and owners at the end of a long chain. The true value or income generation capacity of key content has never really been passed on to the owners or producers. The broadcaster, the distributor of that content has been the true beneficiary of the value.
Another way of looking at it is that the brands have overpaid. The key benefits of advertising and sponsorship are not up for debate, not here anyway. The ability to deliver and then report on the ability to deliver has been the bedrock of the media planning and purchasing industry. However as the distribution market has become more complex with the addition of new distribution channels, everybody's margins are being squeezed. Brands are questioning the value for money of purchased media. Especially when the data, which they have been used to being consistently positive and transparent for the past 40 years, suddenly starts heading in a murky and negative direction.
So-called proliferation of choice has had a direct effect on the earning ability of broadcasters from advertising and sponsorship revenues. It has also hit the media planning and distribution agencies, which as a cost plus industry have found that they are chasing ever-tightening margins. For the Brand Centric Creative agencies any real or threatened downward spiral in the effectiveness of their creative pitch also puts under threat their ability to charge their clients.
Meanwhile some distribution channels have freed themselves from reliance upon advertising and sponsorship income. To subscription services, such as digital television and to a lesser extent 2.5 and 3rd generation mobile phone services, ad income is jam.
Bottom line ?
There's a fall in audience figures and resulting drop in income across the board for broadcasters from advertising and sponsorship. This fall is a direct result of the decline in effectiveness of purchased media to deliver audiences.
What does this mean for Broadcasters?
They have to free themselves from expenditure based on the income from advertising and sponsorship revenue.
What does this mean for Creative Agencies?
They have to rethink their brand communications to get away from brand associations and reliance upon purchased distribution and into content.
What does this mean for Media planners and purchasers?
They have to create the means of distribution within content to support purchased media plans.
What does this mean for Content producers and owners?
They have to look at forms of income other than broadcasters producing at risk.
Now there is no need to push any panic button, what I've just described is just a trend, it is not the end of a system which has meant that everybody has got paid, all along the line from the Creative Agency Planner down to the Broadcaster's sales force. But it is a significant trend.
The harbingers of doom who have predicted that the two-headed monster of proliferation of choice and technological advances in the guise of Personal Scheduling Devices such as Tivo and SKY+, would bring down the established media order have as yet been proved wrong, and long may they continue to err.
Broadcasters are not about to let open the flood gates and give airtime to agencies and producers who work directly with brands and create content to the detriment of a well established media purchase strategy.
Meanwhile brands are not about to clasp the bosoms of producers and distributors and risk the relationship with their loyal agencies, especially when the new guys carry no proof or rather even promise of future proof, whereas the old guys have been backing up their deeds with facts figures and research since the first meet.
But Advertiser Funded Programming does not belong in the same obsolete file as interactive television, 3G video, or Internet bannering for that matter. Although it has been much heralded and not really arrived it doesn't for once mean that it isn't coming.
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