Transcript Return on Investment in the Marketing Communications

ROI
in Marketing Communications
dr. Tamás D. Szabó
Ass. Prof. CORVINUS University of Budapest
Senior Media Manager of Hungarian Telecom
Ad expenditures in the world
 Ad expenditures in million USD
North America
Europe
Asia/Pacific
Latin America
Africa/M.
East/ROW
World
2004
168,25
104,545
78,801
15,513
18,188
2005
173,292
108,057
82,76
18,193
21,361
2006
182,088
113,032
87,698
19,67
24,835
2007
190,048
118,112
94,467
21,391
27,834
2008
199,203
123,169
102,148
23,088
31,335
385,297
403,663
427,324
451,853
478,943
 Press and TV are the 80% of the total advertising expends
 Offline ad expenditures growth rate 3-5%, but the online ad
growth rate is around 20% yearly; search engine
advertising grows fastest, by 200-500% yearly
Advertising - marketing communication
and it’s result (different indicators)
 How can you quantify the result and the effectvivity of a
campaign?
 Media manager’s point of view:
 Reach, Frequency, Effective frequency
 Cost per Reached (Thousand) people within the target audience …
 Marketing communication manager’s point of view
 Advertising awarenes, Brand attitude changes,
 Marketing manager’s point of view
 Market share change, Advertising activisation ratio to brand trial,
 Sales manager’s point of view
 Sales increases during the campaign
 Finacial manager’s point of view
 Marketing communications expenditure vs. Turnover; Ebitda
 CEO’s point of view
 Short term view: Profit increases and
 Long term view: Brand value increases due to the marketing
communications activity
Fashion?
 Today’s phenomena:
EFFICIENCY and EFFECTIVENESS
 The Marketing communication is similar to the
football: everyone are „professor” in it
 Most company are decreasing they marketing and
communication budgets
 The decision is made by the top management,
including: CEO, CFO, CMO, …
Marketing persons need to use terms and
measurements that replects to the CEO’s point of
views
Advertising is only the 7th most important
factor of brand or company choice
A friend had recommended them
I had past experience of the company
I had plenty of written information from them
before I decided
I know where the company is based/I know
their address
I could find out enough abouth that
company/product from other sources
A newspaper/magazine had recommended
them
I had seen advertising about their
service/brand/product
I had seen their website
Source: BMRB Omnibus survey
/ Royal Mail April 2001 / MEC
MediaLab 2004
Is there any problem in mass marketing
communications?
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54cents of average return in sales for every $1 spent on advertising
TV ad costs (CPM) increased by 265% over the past decade (US)
14% of people trust in ad information
90% of people who can skip TV ads, actually do it
People exposed to 3000 ad messages a day
56% of people who avoid buying products from companies who they
think advertise too much
 65% of people believe that they are bombarded with too much
advertising
Source:Connected marketing 2006
So, is there any crisis in mass
marketing communication?
YES, a big one!
Measurement:
ROI: Return On Investment
 Mainly used in financial terms
 A performance measure used to evaluate the
efficiency of an investment or to compare the
efficiency of a number of different investments.
 To calculate ROI, the benefit (return) of an
investment is divided by the cost of the
investment; the result is expressed as a
percentage or a ratio.
Making ROI into work
 Equation of ROI
 High ROI means: profitable campaigns, more sales, more
profit, higher share prices,
Everyone
(shareholders within and outside of the company)
is happy
How to make Return on Marketing
Investment (ROMI) high?
Increase the Counter
 Increase the gain, Outcome of the campaign
Decrease the Denominator
 Decrese the cost, increase cost efficiency of
your marketing/marketingcommunications
expenditure (investment)
Some tips to increase ROMI
Concentrate on Outcomes not Outputs
 Outputs: brand awareness, reach, effective
frequency, CPT,
 Outcomes: intention to buy, brand tial, repeat
volume, loyalty, retention rate, price premium,
customer profitability…
Increase cost efficiency of marketing
communication campaigns
 Concentrate the purchasing power: you can
reduce media and advertising prices
Other technics
 Focus on your existing customers
 Use CRM
 90% of your turnover is coming from your existing
consumer
 Geting new customers need 6 times more marketing
investment than keeping the existing ones
 Use effective marketing communication methods
and channels
 Differentiate any way you can
 Focusing on how consumers receive the marketing
communication message: Increase Engagement,
 Increase the impact of your communication
 One of the most effective tool is the Internet
Marketing – mass marketing
 Marketing:
satisfying market needs through the
commercialization of products and services in
such a way that satisfies internal company needs
and those of the company investors
 Mass marketing:
satisfying widespread market needs with
standardized mass-produced products and
services, typically promoted through standardized
mass media advertising
We are in the new marketing environment
 New personal communications technology (blogs, instant
messaging, mobile phones, e-mail, etc.)
 Increased marketing literacy among buyers and consumers
 Acute advertising clutter
 Media fragmentation
 New ad blocking technology
Models of Media Influence
‘Magic Bullet’ Model
‘Two-Step Flow’ Model
The myth
The reality
Advertiser
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Marketing communications
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Target Audience
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Advertiser
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Marketing communications
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Opinion leaders
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Mass Majority
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Who are the opinion leaders, hubs
Target buyers who frequently offer for
category-related advice by their peers,
 Industry experts,
 Journalists
 Reviewers and media celebrities
 Average consumers who are highly connected
hubs of word of mouth in their social network
Finding Opinion Leaders
1. Self-designation
 Questionnair, grades (1=strongly disagree to 5=strongly agree):
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My friends/neghbours consider me a good source of advice about [category]
I tend to talk a lot about [category] to friends/neighbours
In the past 6 month, I’ve talked to a lot of people about [category]
When asked for advice about [category], I offer a lot information
When discussing [category] products, I usually convince them of my opinion
 eg. P&G, www.tremor.com
2. Professional activity
 eg. 3M office stationary products – secretaries to CEOs
3. Digital trace
 eg. category-relevant blogs, websites, newsgroups, forums
4. Key informants
 eg. Hasbro POX; „who is the coolest kid?”
5. Sociometry
How to use opinion leaders to support your
marketing goals
 Howthorn effect (psychology)
 If you ask some advice on some matter from someone,
and you listen and appreciate their oppinion, you „open
a gate” in that person. Then you simply ask them for
whatevere you want from them.
 Practically if you do some research within the
opinion leaders about a new product, you can use
the Howthorn effect. They will be your free
advertising people.
Seeding trials - research
 Software industry: Beta testing,
 Give free beta version of a software to the opinion
leaders and they will be your first buyers and a no cost
advertising people
 Car industry:
 Give test cars to the opinion leaders, they will be the
advocates of the given car
 Journalists
 Reviewers and media celebrities
 Sport shoes:
 Nike and Reebok offered the newest sport shoes to the
coolest kids, it generated word of mouth activities
Checklist of seeding trials
 Is it a right product?
 Are we offering something new?
 Are we offering something better?
 Are we offering something that can be sampled?
 Could we find the right people?
 Hawe we identified our opinion leaders?
 Are we seeding to enough opinion leaders?
 How are we going to deliver the trial experience?
 Is it a right action?
 Does our seeding trial involve exclusive „Get it first” sampling?
 ‘VIP Vote’: are we giving seeding trial participants a say in our
marketing?
 Does our seeding trial offer participants an ‘Inside scoop’? To
know more about the product, to be an ‘INSIDER’
 Can we measure?
 Have we put in place a mechanism for measuring the
effectiveness of our seeding trial?
Change of Paradigm
Intrusive advertising
Push
Mass messages
Isolated communication
events
Clear identification of
advertiser
Permission marketing
Pull
One-on-one messages
Relationship marketing
Integration of
promotional and
entertainment content
Connected marketing can be the solution?
Connected Marketing Techniques
 Word of mouth marketing: Umbrella term for marketing
practices which aim to make consumers talk about the
brand
 Buzz marketing: Using a special ‘hook’, event or
promotion to get consumers and the media talking about
a campaign.
 Viral marketing: Creating branded Internet materials or
websites that consumers enjoy sharing with their friends,
usually by email.
 Influencer marketing: Identifying and involving the most
influential consumers in a target market to turn them into
brand advocates.
 Evangelist marketing: Involving the most loyal
customers to turn them into brand advocates.
Word of Mouth - Definiton
Oral, person-to-person communication between a
receiver and a communicator whom the receiver
percieves as non-commercial, concerning a brand, a
product or a service
 Oral – what about instant messaging, e-mail and other „fast
forwarding” possibilities?
 The key is that the content itself is commercial (as it’s about a
brand) but it is percieved as non-commercial.
Unusual start of word of mouth
Viral marketing
 Strategy that encourages individuals to pass on a
marketing message to others, creating the potential for
exponential growth in the message’s exposure and
influence. Like viruses, such strategies take advantage
of rapid multiplication to explode the message to
thousands, to millions.
 Rapid multiplication
Viral marketing – Objectives
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To maintain or boost a cost-effective level of brand
awareness
 To kick-start consumer-driven interest in new
marketing communications activity
Additionally:
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Reach beyond core target market
Create buzz around products that have no ‘wow’ factor
Accelerate natural buzz
Reinforce existing ad messages
Extend other marketing activities
Possible problems with viral
Low controll on who will receive it
Hard to measure and evaluate
Users could feel it as a Spam
Sorce:Sandeep Krishnamurthy (2000)
Blog Marketing - Definition
The use of weblogs to promote a brand, company, product or
service, event or some initiative.
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Viral potential
Measurable
Gives marketing a human face
Credibility
Dialogue
Blog Marketing
 Approaches
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‘Blogvertorials’: Encouraging third party bloggers to post
positive comments or reviews
Business blogs: Running branded or corporate blogs to
promote a brand or company
‘Faux blogs’: Controversial practice setting up false/fake
customer, client or consumer blogs
Capabilities
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Generates Interest
Drives action and sales
Creates goodwill
Establishes expertise
Dialogue with customers
The Way Forward – Connected Relations
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Influencers are online
Not necessarily early adopters, trednsetters but many are
Often detached from the mainstream
They want to be heard
They want to be VIPs
The Way Forward – Questions
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Measurement
„Really” integrated communications
Brand marketers’ perception about future
Buzzword
 A buzzword (also known as a fashion word or vogue word) is an idiom,
often a neologism, commonly used in managerial, technical,
administrative, and sometimes political environments. Though apparently
ubiquitous in these environments, the words often have unclear
meanings.[Wikipedia]
 Buzzwords are typically intended to impress one's audience with the
pretense of knowledge. For this reason, they are often universal. They
typically make sentences difficult to dispute, on account of their cloudy
meaning.
 Buzzwords differ from jargon in that they have the function of impressing
or of obscuring meaning, while jargon (ideally) has a well-defined
technical meaning, if only to specialists. However, the hype surrounding
new technologies often turns technical terms into buzzwords (see
Buzzword compliant). [Wikipedia]
 A buzzword may or may not appear in a dictionary, and if it does, its
meaning as a buzzword may not match the conventional definition.
The way we are working in marketing
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