ROI in Marketing Communications

1. ROI in Marketing Communications dr. Tamás D. Szabó Ass. Prof. CORVINUS University of Budapest Senior Media Manager of Hungarian Telecom

2. Ad expenditures in the world • Ad expenditures in million USD • 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

3. 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

4. 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

5. 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

6. Is there any problem in mass marketing communications? • 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

7. So, is there any crisis in mass marketing communication? YES, a big one!

8. 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.

9. 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

10. 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)

11. 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

12. 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

13. 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

14. 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

15. Models of Media Influence ‘Magic Bullet’ Model The myth ‘Two-Step Flow’ Model The reality Advertiser  Marketing communications  Target Audience    Advertiser  Marketing communications  Opinion leaders   Mass Majority   

16. 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

17. Finding Opinion Leaders • Self-designation • Questionnair, grades (1=strongly disagree to 5=strongly agree): • 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 • Professional activity • eg. 3M office stationary products – secretaries to CEOs • Digital trace • eg. category-relevant blogs, websites, newsgroups, forums • Key informants • eg. Hasbro POX; „who is the coolest kid?” • Sociometry

18. 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.

19. 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

20. 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?

21. 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 Change of Paradigm Connected marketing can be the solution?

22. 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 intobrand advocates. • Evangelist marketing: Involving the most loyal customers to turn them into brand advocates.

24. 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.

25. Unusual start of word of mouth

26. 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

27. Viral marketing – Objectives • To maintain or boost a cost-effective level of brand awareness • To kick-start consumer-driven interest in new marketing communications activity Additionally: • 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

28. 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)

29. Blog Marketing - Definition The use of weblogs to promote a brand, company, product or service, event or some initiative. • Viral potential • Measurable • Gives marketing a human face • Credibility • Dialogue

30. Blog Marketing • Approaches • ‘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 • Generates Interest • Drives action and sales • Creates goodwill • Establishes expertise • Dialogue with customers

31. The Way Forward – Connected Relations • 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

32. The Way Forward – Questions • Measurement • „Really” integrated communications • Brand marketers’ perception about future

33. 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.

34. The way we are working in marketing