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Long Term Ad Effectiveness Measurement --- T he Single Source Solution

Long Term Ad Effectiveness Measurement --- T he Single Source Solution. Leslie Wood Chief Research Officer Nielsen Catalina Solutions. Dave Poltrack Chief Research Officer CBS Corporation President CBS Vision. September 19, 2014 – Marketing Research Council. Agenda. Background

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Long Term Ad Effectiveness Measurement --- T he Single Source Solution

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  1. Long Term Ad Effectiveness Measurement ---The Single Source Solution Leslie Wood Chief Research Officer Nielsen Catalina Solutions Dave Poltrack Chief Research Officer CBS Corporation President CBS Vision September 19, 2014 – Marketing Research Council

  2. Agenda • Background • New Work – Methodology • Case Study – Five Brands • New NCS Solution – Long Term Effects

  3. Background – Original Study • Ad Works I (1991) showed long-term effect of advertising to be the 2x short-term sales effect • Still used anecdotally • Suggests only half the value of advertising is counted by mix models • Advertising may get fewer marketing dollars vs. promotion, trade, etc. • Allows for no variation by campaign, medium, brand/category, or long-lasting branding effects • It’s time for a new look!

  4. Background – Current Research • NCS conducted a five-brand study, including Kellogg’s, on the Long-Term Effect of Advertising • Presented at ARF 9.0 June 2014 • Sponsored by CBS • Marketing Accountability Standards Board (MASB) – Study with four brands, using the NCS Single Source Methodology (Summer 2014) • New CRE (Center for Research Excellence) Study: Towards A More Complete Measure Of Advertising Value and ROI • Study will lead advertisers to new, valid methods of assessing long term value Literature Review Process Expert Interviews “Good Practices” Case Studies White Paper

  5. Value of Long term effects Over the past 25 years the balance of spending between advertising and promotion has shifted dramatically • In part due to ability to measure the impact of promotion • Advertising has been evaluated only on the short-term • While studies 20 years ago showed that the long term is twice the size of the short term! “Measurement and analysis that consider only short-term impact may put advertising at an unrealistic disadvantage when allocating marketing resources to maximize long-run profitability” Hanssens 2011 Hanssens, D. M. (2011). "What Is Known About the Long-Term Impact of Advertising." 1-19MASB What is know Series

  6. Measuring the Long Term • “If an advertising test was successful in Year 1, there would continue to be long-term effects of the advertising which, over the course of the next two years, would amount to a full doubling of the first-term impact.” • Adworks 1991 Benefits of Having Actual Long Term Measured: • Having real measures provides insights into what drives long term • Insights drive better decisions • Better decisions drive higher effects • Having real measures provides insights into budget setting Information Resources Inc. (1991) “How Advertising Works”

  7. Theory – Brand Equity Brands with loyal customers face less pressure to reduce their prices and therefore enjoy a price premium. Together, quantity and price premiums reflect a brand’s long-term health. Lodish, Mela 2007 • Advertising is a key driver of brand equity • Brand equity embodies the concept of the long term brand value While immediate increases in sales arising from discounts are striking, the effects of discounts and of other components in the marketing mix—such as advertising, new products, and distribution—can be understood only over the long term. Lodish, Mela 2007 Lodish, L. M. and C. F. Mela (2007). "If Brands Are Built over Years, Why Are They Managed over Quarters?" Harvard Business Review.

  8. Methodology

  9. Methodology – Then and now

  10. Critical Measure Identified: Trial and Depth of Repeat • Trial is identified first: • First time brand buyer in past X period (6 months for these brands) • Among non-triers – Depth of Repeat • Count of consecutive brand purchase when category was bought • This was capped at 6 to reduce the long tail 2 3 5 2 1 6 1 0 4 6 2 6 0 T 0 0

  11. Long-Term Measurement Design 2. Short-Term Effects Period 3. “Future” Period 1. Warm-up Period

  12. Long Term Methodology Summary • Identify each purchase exposed within 28 days in the analysis periodand tag for Trial or Depth of Repeat. • For each purchase time-align that purchase as “Week 1,” and measure the weekly “future” purchases for that HH. • Average weekly brand dollars per household. • The incremental value of a HHs moving up the chain of repeat is calculated and summed across the entire “future” period. • This total incremental “future” value is divided by the sales in “Week 1” to get the multiplier.

  13. Long Term Methodology Summary • Identify each purchase exposed within 28 days in the analysis periodand tag for Trial or Depth of Repeat. • For each purchase time-align that purchase as “Week 1,” and measure the weekly “future” purchases for that HH. • Average weekly brand dollars per household. • The incremental value of a HHs moving up the chain of repeat is calculated and summed across the entire “future” period. • This total incremental “future” value is divided by the sales in “Week 1” to get the multiplier.

  14. What are we measuring? • In essence, we are measuring the future value of moving a HH into trial or to a higher depth of purchase among exposed HHs • This is a form of customer lifetime value, but only measuring that value out for one-year or five-quarters. • The value of moving an exposed HH into trial or a higher depth of repeat is weight averaged by the degree to which the short-term effects drive the movement into trial and deeper repeat. This method does not measure the direct value of the advertising into the future. The direct value of the advertising is embodied in the short-term effects.

  15. Kellogg’s Special K

  16. Kellogg's Special K Short-term Effects: Special K’s advertising drove incremental gains across all segments, with the highest lifts being in the most loyal segments with the highest depth of repeat Trial Lapsed increasing Loyalty

  17. Kellogg's Special K Short-term Effects: Translating lift into generated dollars shows the largest gains are among the lapsed and trial purchases since these are the largest segments (shown on different scales) Total Category Dollars Brand Dollars Generated (Lift)

  18. Kellogg's Special K Short-term Effects: Translating lift into generated dollars shows the largest gains are among the lapsed and trial purchases since these are the largest segments (shown on different scales) The lifts are then stacked to show the Short-term Effects Stacked Lift Total Category Dollars Brand Dollars Generated (Lift)

  19. Special K Long Term Current Week reports week where short-term effects are measured “Future” period measures weekly dollars for each HH influenced to move their depth of repeat up one step – from zero to Trial or Depth of Repeat 1, or Depth of Repeat 1 to 2, etc… The distance between 5 and 6+ is larger because it includes the 7th, 8th, … 142nd, 143rd…

  20. Special K – “Future” The colored area is the value of moving a HH from one depth of repeat into the next higher segment (difference in areas under the curves) The growth in the curves during the first few weeks reflect the purchase cycle for the brand.

  21. MultiplierWhat is the short-term multiplier to get to Long-Term? Trial 1 2 3 4 5 6+ Depth Total Multiplier to five quarters (65 weeks)

  22. Five Brands – Long TermSoft Drink B Note that the value of Trial and 1 is extremely high. 6+ Depth of Repeat is also high due to the large, thick tail of repeat. This large thick tail is indicative of high brand loyalty High brand loyalty also translates to a large value of driving trail and switching.

  23. MultiplierWhat is the short-term multiplier to get to Long-Term? Trial 1 2 3 4 5 6+ Depth Total Multiplier to five quarters (65 weeks)

  24. Five Brands – Long TermSoft Drink C Soft Drink C also has extremely high Trial and 1. 6+ Depth of Repeat is again high due to the large, thick tail of repeat.

  25. MultiplierWhat is the short-term multiplier to get to Long-Term? Trial 1 2 3 4 5 6+ Depth Total Multiplier to five quarters (65 weeks)

  26. Five Brands – Long TermBoxed Prepared Dinner D This is a smaller brand than the others measured so far. This creates much more volatility than seen in the other brands.

  27. MultiplierWhat is the short-term multiplier to get to Long-Term? Trial 1 2 3 4 5 6+ Depth Total Multiplier to five quarters (65 weeks)

  28. Five Brands – Long TermToothpaste E This product takes quite a bit of time to “catch-up” and then begin to decay. This product has a much longer purchase cycle than the other brands measured.

  29. MultiplierWhat is the short-term multiplier to get to Long-Term? Trial 1 2 3 4 5 6+ Depth Total Multiplier to five quarters (65 weeks)

  30. Adworks Long Term Effects ResultsCarry-Over Year Two (First Year After Campaign)

  31. Adworks Long Term Effects ResultsYear Three Effects (Second Year After Campaign)

  32. Advertising Value The NCS multiplier estimates the long-term value, which requires adding the short-term value back in to get the total value of advertising. The total values for these five brands range between 1.8 and 4.5. Short-term + Long-Term = Total Value How Advertising Value Traditionally Works 1 + 1 = 2 NCS’s View on Short-term + Long-Term = Total Value Advertising Value Soft Drink Brand B 1 + 3.5 =4.5 Soft Drink Brand C 1 + 2.6 =3.6 Kellogg’s Special K 1 + 2.5 = 3.5 Boxed Prepared Dinner D 1 + 1.0 = 2.0 Toothpaste E 1 + 0.8 = 1.8 Multiplier on 1-Year* Multiplier on 1-Month** Brand F Example 1.5 x 1.2 = Long Term 1.8+ Short Term 1.2= Total Value 3.0 NCS Long Term Multiplier = 1.5; Short Term = 1.2 * 3-year LT Multiplier on 1-year ST ** 1-year LT multiplier on 1-week sales preceded by ad exposure within last month

  33. Conclusions 1 Advertising does have a long term effect and it can be measured using true single source methodology 2 The long term effect varies based on the brand:The long term multiplier varies from a low of .8 to a high of 3.5! What’s Next on the Roadmap??: Phase 2 will work to better define short and long-term period definitions to align the multiplier to be operationally utilized with marketing mix model results More brands, to develop a deeper understanding including non-CPG Does it vary by media, category, brand, creative, levels of deal? 3

  34. Thank You

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