Profitable Marketing

Hope for Burma

In a world that is so keen on taking up arms to make a point, often a vacuous one, and in which so many of us take freedom for granted, the struggle of the Burmese stands out for its tenacity and poise.

I'll simply link to Avinash Kaushik's blog and let him eloquently illustrate my point.

American's Dim View of Advertisers

A survey reported in DM News recently found that 14% of those queried respected advertisers, all others seemed to take a dim view of the profession. Unlike what I've done in the past, I'll quite the article here:

Other key findings include:

· 84 percent agree (strongly/somewhat), “Too many things are over-hyped now."

· 74 percent agree, “The Internet helps me make better product choices."

· 72 percent agree, “I get tired of people trying to grab my attention and sell me stuff.”

· 52 percent agree, “There’s too much advertising — I would support stricter limits.”

· 47 percent regard “Advertising as background noise.”

· 42 percent agree, “American advertising has improved in recent years.”

· 38 percent believe “The advertising industry understands Americans in general and connects with them.”

· 22 percent believe “The advertising industry understands and connects with me.”

· 24 percent “resent advertising.”

· 82 percent indicate a positive engagement with media overall.

· 59 percent consume “traditional” media.

· 41 percent consume “interactive” media.

The results are so dismal that I am not even sure if accountability will help the image that the profession has created.

Miller and Anheuser-Busch Decrease Trackable Media Spend, Sales Increase... For How Long?

AdAge indicates that the main brewers have re-allocated spending from trackable media to "non-traditional" media. Now about one in every four dollars is spent in the new category, and the interesting result is that... sales have increased.
The simplest guess would be that sponsorships and events produce better results than trackable media, but the questions we should ask are:

• is the new allocation more effective or was the old one ineffective? These two are not the same, the fact that the new media is effective does not render the old one ineffective
• if the old allocation was ineffective was it because the media itself or because the commercials were unimaginative, bordering on the inane? From frogs to dogs, brewers have employed a variety of fauna in their commercials that would honor a National Geographic special, the alternative has been to depict and appeal to the dimmer amongst us... it may be just me but beer commercials tend to be the least inspired I come across
• is the new sales increase due to a change in allocation or to other factors? If the new allocation was towards non-trackable media, it will be difficult to establish some cause and effect relationship between the new allocation and the increase in sales.

All in all, this shift to sponsorships and events is most likely too new to have proven itself conclusively. My bet would be that other factors are at play, and that in the absence of a greater investment in better commercials through traditional channels, sales will taper back down.

Measuring Marketing ROI Does Not Seem to Be a Priority for CMOs

Judging from Pat LaPointe's post, it seems that ANA's (Association of National Advertisers) 2007 Marketing Accountability Conference was a bit underwhelming. From Pat's description:

• the number of companies actively measuring Marketing ROI has not changed from past years
• CMOs seem to be losing interest in ROI measurement, it seems that the topic is losing relevance for them
• It may be that CMOs delegate the task and responsibility of measuring ROI

He concludes that this state of affairs leads to Marketing losing credibility and influence.

I don't dispute the facts, and not having been in Florida for the conference I accept that the attendance was not at the level of years past, but this does not necessarily imply that the topic is losing relevance, it may be that, instead, the conference is losing relevance. This conference may have been different but the trend for conferences and webcasts is that they've become more a chest-thumping and publicity opportunity than a forum for useful discussion of even to learn something new.

More realistically, however, is that we should never expect that Accountable Marketing be a common process in all companies. The need to implement this practice is felt in companies that are stagnant at best, or that are in crisis at worst; aside from these two extremes I can't see a CMO allocating funds to an initiative that does not map clearly to a benefit. What I am point at is the irony that the ROI measurement effort itself must pass some ROI threshold: the resources dedicated to it must generate some incremental benefit to justify being implemented. Measurement for the sake of measurement generates a cost with no benefit.

Which brings us to the cases in which accountability becomes necessary: when the orders no longer roll in like before,  or when sales stop growing. In these cases it makes sense to allocate the extra funds to find out what marketing vehicles truly drive sales, and how they can be maximized; other than that, it is nice to know where marketing dollars are going but there may not be a sense of urgency in tying the expenses to a benefit. In most organizations, accountability off the general ledger works just fine.

Of Yellow Tail Wine, Marketing and Product Quality

I read time and again about Yellow Tail's brush with success in the US market. Some articles mention that having a little, cute or somehow stylized animal on the label seems to pump sales and that other wineries are following suit by changing their labels to more "drinker-friendlier" designs. There is also some brouhaha about Yellow Tail's marketing and how great it is, what is consistently missed is that Yellow Tail is successful because its products are delivered to the market at an adequate price, that it is selling wines whose price-quality relationship is extremely well balanced.

I wouldn't dismiss the labels as having some influence in driving customers to a first try but, in the end, it is the quality of the wine and its price that keep customers coming back. No amount of excellent advertising can help a brand become the best seller in its category without being supported by great quality and a price to match.

An all this piques my curiosity: beyond a possible glut of rarely good Shiraz how can the Australians place a 1.5 liter bottle in the market at about $11 and be profitable when Californian producers of comparable quality would easily charge at least $5 more?

We can guess that Yellow Tail is making wine a mainstream beverage the result of which is that the cachet that California producers count on to charge a premium will evaporate. This is an industry that may be in for some more consolidation.

Southwest Airlines - How Poor Judgement can Lead to Bad PR

MSNBC reports that a passenger in a Southwest flight was taken off a plane for wearing a "skimpy" outfit. This passenger was then allowed on after somehow making the outfit look less skimpy, and was afterwards allowed on board a plane for the return trip wearing the same outfit. Ironically on the return trip the outfit elicited compliments from the flight attendants.

I am not surprised that a misguided, overzealous or otherwise dyspeptic employee could cause a minor PR issue for Southwest by trying to enforce some vague sartorial standards, that is the exception that is to be expected from any business; what surprises me is that Southwest did not even consider an apology and that it is hiding under the nebulous concept of being a "family-oriented" airline.

We can only guess that Southwest figures that it gets more business from "families" than from scantily clad young women and has chosen to favor the former at the expense of the latter.

This type of business maths reminds me of the infamous "Pinto memo": in 1968 the Ford Motor company decided to launch the fantastically igneous Ford Pinto knowing that it would burst into flames in rear end collisions due to the configuration of its back end as well as the location of its fuel tank. Once the car proved a monumental health threat, an internal memo from Ford surfaced in which it became clear that Ford was aware of the car's shortcomings, and had looked into mitigating designs. As it turned out, the memo included some innovative business maths: it indicated that the cost of producing a safe car would be around $121 million whereas the cost of settling lawsuits from exploding cars would be around $50 million.

Sometimes the logic of maths does not translate well to customer satisfaction or brand image...

Advertisement Delivery in a World of Digital TV

My previous post about TiVo had me speculating about how digital TV will change the ad business. As we saw from the analysis of the TiVo in a world of digital TV data media planning is based less on knowing who is watching what but more on knowing the actual composition of each household, what their demographics and interests are and about being able to customize and match ads to these interests in the proper programing context. The process seems akin to that followed by direct marketing in that demographic, behavioral and sometimes even attitudinal data is used for targeting but with the added complexity of matching the delivery of an ad with the right context (for example, Bowflex is aired during the broadcast of sporting events).

We can speculate further about other aspects that will impacted or impact the ad world:

• Media buys become granular - as we just discussed, a digital TV world will allow for very granular matches of content to audience, media flights are no longer very aggregate chunks of time that address a plethora of audiences, but very precise time slots in targeted programs that are delivered to households with pre-specified characteristics. This added complexity may lead to a cottage industry of algorithm development to enable such granular matching, the whole scenario should not look much different from the way Search Engine Optimization (SEO) currently works. It would seem natural for the Googles of the world to enter this space.
• Intelligence - carriers may create additional revenue streams from the sale and analysis of viewership data, current database and list vendors might have to invest substantially to adapt their business model to this new reality
• Content - as great as creative always intends to be, effective delivery of relevant content to the level of customization that digital delivery enables will imply that ads will be produced in modular form, the pod production currently used in DRTV may become the standard for TV ad production. This type of production allows for automated ad configuration and for a better matching of content to audience, for instance, a wealthy prospect in the Northeast may be less interested in the payment options of a Bowflex apparatus than on its features, and automated configuration may well allow for this level of customization
• Analytics - I can see contingency carrying the day with some graph analysis not far behind. In this not so future world, the placement of an ad of a given type in the 8:00pm broadcast of Law and Order will depend on the previous success of similar ads in similar slots, where data is lacking, business assumptions will be brought to bear on the analysis and Bayesian approaches will help optimize effectiveness. Certainly testing is not to go away and digital delivery is very likely to enable automated test execution: much like online retailers can now deliver customized pages for a factorial test, digital delivery will allow for the automated delivery of customized ads according to a test grid.

All in all, it is likely that digital delivery will do for TV ads what the web did to direct retail advertisement. Let us way and see... the wiser will be prepared.

TiVo Viewer Data : Campaign Effectiveness from Media Planning and Relevance, Not from Great Creative

TiVo has started selling information about the viewing habits of its users and is probably ushering in a new era of for media planning. According to a recent article in Business Week TiVo has started selling information about the viewing habits of 20,000 households, a salient conclusion from analyzing this information is that direct ads (DRTV) command the highest audience and get skipped the least. This analysis seems to point to the fact that relevance, not great creative determine campaign effectiveness; as an example, consider that ads for Bowflex aired during sports broadcasts were among the least skipped. This ability to map the nature of the ad to its intended audience with laser-sharp accuracy points to the possibility that the future of effective TV spots may depend more on "smart media planning, not on creative ads."

The article also allows us to imagine a near future in which digital TV will allow for a more exact and immediate measurement of ad viewership, it also makes it possible to map ad type to household and to intended audience. Media buying is becoming increasingly more "scientific" and media costing will depend more on actual than on inferred response. It will be very interesting to see how Mad Ave will use this data.

A Fail-Proof Approach for Problem Solving

If you haven't done so yet, take a look at and vote for my proposal for an e-book at Change This: http://www.changethis.com/proposals/1023

The voting period expires in two weeks and I need your vote to have the proposal approved and the e-book published. Go ahead and do away with pretentious and complicated approaches to problem solving, learn how to apply the "Where's Waldo Method". The approach is particularly useful for team work and for those long sessions in which no one seems to be able to pin point the right direction for a solution.

Media Mix Modeling and Optimization Use and Abuse - Limitations and What to Look For

To round off my series of posts on Media Mix Modeling and Media Mix Optimization it is only fair that we discuss the limitations of the approach and warn you of what to look for.
The best way to approach this topic is to understand its components and how they work (at a high level, of course):

1. media mix modeling has to do with being able to determine the contribution of each medium to a business outcome, more specificaly for instance, it is about being able to tie media spend to, say sales or response or web visits
2. media mix modeling is about issuing recommendations for spend allocation across media in order to

• attain a targeted business outcome (e.g. sales) with a minimal budget or

• maximize a business outcome given a predetermined budget

According to this simple classification, a MMM is necessary in order to implement MMO; also, it is clear that MMM is an analytical process that looks into the past whereas MMO projects into the future.
Armed with this simple classification it is easier to understand and discuss the following main limitations of Media Mix Analysis:

• back to the future - this type of analysis is great at describing the past, the more and more granular historical data that is used, the more robust and accurate the model and the better the description of how the different media contributed to the outcome. If a spending plan is fed to the model, it is possible to produce fairly accurate forecasts of the outcome of that plan and an optimization model based on this analysis is extremely likely to produce excellent results. The problem is that the future is not very likely to mirror the past and backward-looking nature of this models does not make them particularly reliable predictors of the future. These models provide great guidance for Marketing spending in industries and environments that are relatively stable and only in the medium term (fiscal quarter at most). The output of these models should be viewed more as directional guidance than as dictum and Marketers must be aware that this guidance can and should be overridden as business conditions change

• bad synergy - accounting for synergy between media is what distinguishes good models from bad ones: the former evaluate the strength of the synergy between media (positive or negative) and the corresponding lag, whereas the latter may ignore this aspect altogether. This is an extremely important element of a good model: mass supports direct and you'll need to know not only whether TV30 works better with DM than TV60 or Radio but also how much better, you will also need to know how far ahead of time do you need to plan your media flights. In the absence of this functionality your model is seriously lacking in value.

• closed system - this is almost like thermodynamics: closed systems are as great for analysis as they are far from reality, in the case of MMM, the models account for historical data and for forward-looking plan but have no way to make allowances for possible variations in the business environment. For example, competitive action may be entered by way of pricing or of spending but it is nearly impossible to predict and include a variable that accounts for the introduction of a new product by the competition. Another care is related to the relative importance of environmental factors: a model for retail built on data from 1995 to 2000 would likely indicate that macroeconomic factors had little impact on the outcome... the model would tell very differently in 2001 after the dot-com bubble burst and personal spending was drastically reduced.

The main take away from this post is: the best or perhaps the most prudent use of MMM and MMO is directional, consider that the models outline a a way to allocate your spending but that this recommendation is limited and may need to be revised as business conditions change. Following the recommendations of MMO to the letter or too closely may be a costly mistake.