Tuesday, February 22, 2011
Tuesday, February 15, 2011
Lesson 2 – Targeting
So you have decided to make and sell widgets and you have either a concept or prototype that you have done some Marketing Research on and the data tells you that concept acceptors (people who like your widget) skew to being Left handed male squirrels who wear glasses. What that means is that your concept may have had a purchase intent score of 5% responding (Probably Purchase/Definitely Purchase) for a general US representative audience, but when you isolate Left Handed male Squirrels who wear Glasses, that specific demographic had a 80% Probably Purchase/Definitely Purchase) score. This example is very exaggerated compared to real life, but it simplifies the discussion.
What this really means is that if you can find a Left Handed male squirrel who wears glasses you are like to be successful interesting him in your widget. There may be some other random people who will also buy your product but your Core Market consists of Left handed male squirrels who wear glasses.
Now you need to figure out how to find these consumers and advertise to them. This task may be made more difficult by the fact that Left handed male squirrels who wear glasses represent 2% of the US population. You could decide to simply advertise to a wide audience and trust that the Left handed male squirrels who wear glasses will see your ad and buy your product. SO you decide to place an ad with the broadcast that reaches the largest number of people, the Super Bowl. The media company (ie the network) comes back and says, that will be $3M please, and you are now in a pickle because you budgeted your advertising budget for the entire year to be around $250k.
This seemed easy – how can you fail, it’s the SUPER BOWL. Problem is that of the people who are watching your product, only 2% of them (the Left handed male squirrels who wear glasses) would ever be interested in your widget, the other 98% couldn’t care less. You are in essence wasting 98% of the ad impressions you would be paying for with a Super Bowl ad which means you are grossly over paying for the impressions that do matter. Homework question – so what kind of product would be best served by advertising on the Super Bowl?
As you contemplate your hopeless situation a salesman from Nutty Communications representing the Forestry Network suggests that you should advertise on his network. Your first response is that he must be crazy, only 2.5% of the population ever watch that network and that of that 2.5%, 0nly 2% would be in the target demo group. Your ad might reach 3 Left handed male squirrels who wear glasses in total. The rep then says, No no, The Forestry Network itself skews to an audience made up of Left handed male squirrels who wear glasses. In fact 75% of their audience are Left handed male squirrels who wear glasses. In the end most (not all) of the population of Left handed male squirrels who wear glasses watch The Forestry Network. The Network aligns nearly perfectly with your targeted audience. A media buy here, is going to be very efficient as it wastes very few impressions and is much more likely to fit your limited budget.
Ultimately that is the dance between advertiser and media publisher, the advertiser is trying to find media that best matches the targeted demo’s or attitudes that are likely to be interested in his product and the media publisher is trying to sell space to advertisers whose products are fits for his space. If there is a moral hazard here, it is with the publisher or media property owner who has inventory (slots to run ads or side pods to fill) but not enough advertisers who fit the “best fit” description may sell the space simply to unload it even if the advertiser is not a good match. The advertiser needs to do their research on the media property in question.
In the old days of 4 tv stations per market, size mattered most for audience ratings, individual shows may have skewed, but the overall rating was the most important thing. In the current environment of media fragmentation (billions of channels) and efficiency (limiting the % of wasted impressions) Skew matters nearly as much as total audience. If a media property skews towards matching a product category whose producer’s have advertising budget to spend, it may be a gold mine even if it never cranks out more and a single Nielson ratings point. In fact there are networks created for no other reason than to serve specific advertiser needs, the Home Improvement channel is one such example.
One additional thing to consider here is the range appeal of the advertiser’s product and its unit margin. This essentially gets us to an understanding of what the advertising budget is likely to be for that advertiser. That budget determines where the advertiser is going to be shopping for media: A $3M superbowl ad or a $1000, surplus inventory placement.
I have commented on the skews and sizes of audience for different motor racing properties in the past. Nascar has the widest appeal, but comes with the highest price point ($22M a car). Sports cars has the most severe, yet advantageous skew towards a very High Net worth audience and both have made it work to their advantage. IndyCar has been stuck in between not skewing enough to draw ultra premium brands to the fold, but not broad enough to be a portfolio tool for a broad based product advertiser. It has been my impression that in the Past IRL leadership had the goal of increasing the skew, but current leadership, Randy Bernard, is making growing the overall number his #1 goal.
It certainly is a change in strategy, one worthy of some commentary, but Its late, I’m tired and this was really meant to be an informative piece, not an opinion piece. I’ll leave that to you as a home work essay to work on. Have a good evening and keep counting down the days, the smell of ethanol will be upon us soon.
Monday, February 7, 2011
An interesting debate began to wage earlier today when Paul at More Front Wing publically pondered at his site whether $9M would be better spent on three Super Bowl ads or Sponsoring a couple cars in the IICS. Then on twitter broke out a flurry of tweets about situational pondering whether this was better than that and whether bigger was better and what exactly happened back in the Chevy tent back in the day and then someone bum rushed the scene with their new buzzword ROI and all hell broke loose.
The most famous quote in advertising goes like this “I know that 80% of my advertising budget is wasted, the problem is I don’t know which 80% it is…” and even though that was said over 80 years ago it is a truth that remains. I personally think that rule applies to Super Bowl advertising as well as it does IndyCar sponsorship. But I am not really interested in joining the fight as far as who is right who is wrong nor what is a waste and what isn’t (but in the end I do, Hypocrite!). I have some exerience here and I just thought I’d spend a few posts talking about some key concepts and then perhaps you all can decide what you think about the effectiveness of various marketing investments the next time a new sponsorship package is announced or the big game is played. And word to the wise - I got sleepy and wandered quite a bit at the end of this first installment....I'll try to do better next time.
Lesson 1 – The Purchase Funnel.
Back when advertising and marketing research began, it was initially populated by a posse of seemingly out of work Psychological researchers. At the time Psychology seemed to posit that rationality carried sway in people’s lives and that every decision made was the result of some overly painful rational decision chain that governed personal behavior. When it came to a consumer’s decision to purchase a product the decision was mapped out into a series of cognitive consideration levels, hence the Purchase Funnel was created. Since the advent of neuroscience, pretty much most everything that was ever thought about decision processes pre 1980’s has been debunked, rationality tossed to the curb and now subconscious Emotions rule the day in psychology and advertising. But the Purchase funnel remains and provides a workable, if occasionally flawed, guide to understanding human decision making and how marketing and advertising can strategically target portions of the decision chain.
Step 1 – Awareness. No one will buy a brand if they are completely unaware of its existence. The first step than any brand must do to sell anything is make sure that consumers know they exist and are an option for fulfilling a need the consumer may have.
Step 2 – Consideration. Consumers may have a list of brands that they know offer products or services for needs they are aiming to fulfill, But they will only consider a subset of these brands to actually purchase from. This trimming of options is based on whatever information they have available to them about each brand. Marketing messages, WOM, prior trial or external reviews.
Step 3 – Trial. Consumers take their consideration list and make a selection as to which brand or product they will actually purchase. The relative value of the products in the consideration set have been evaluated across the benefits, features and costs and a decision is made. For higher priced products, this tends to be a hands on decision that requires some touching, feeling, discussion with another human being or elaborate fact finding research. For products with little financial or relationship commitment … not so much … whims can rule the day here.
Step 4 – Repeat Purchase. They like it the first time so they do it again. Enough said.
I have spent most of my career working the last two levels of the funnel, though in recent times I am spending more time at the front. Admitting a personal Bias here…I think most companies waste money in the top half of the funnel that would be better spent on the bottom half, but the advertising industrial complex and its posse of mini skirted sassy mouthed ad execs are a powerful force against which many a corporate victim has succumbed.
Lets take a look at the steps of the funnel and how ad placement at the Super Bowl or IndyCar might fit in.
Awareness – if no knows who the hell you are and either you intend to sell to everyone or you cannot tell the people you want to sell to from those you don’t (gotta be carefull not to jump the shark on lesson two: targeting) then size matters. The biggest audience is the best audience. There is no audience bigger than the SuperBowl and unlike other events that might pull a big number, the audience is strangely fixated on the ads as much as the content. No other event can claim that half it’s audience watches the ads and pees during the content.
SO if you are trying to introduce yourself to as many people as possible, then the big game is the way to go. A classic example was the initial “Go Daddy” commercial from 5 years ago where a buxom bimbo revealed her artificial assets to an artificial courtroom. Wham, 130M viewers sat speechless asking themselves “what the hell is a GoDaddy?” Awareness achieved, mission accomplished. A more Subtle yet effective example from this year’s crop of ads was the Motorola ad for its new Android powered Xoom tablet device. Until the moment the 1984 ad ran, the majority of the country believed the only tablet device in existence was the iPad.
So if awareness is your goal, and not having the benefit of our next lesson, do you think advertising in IndyCar is a good idea to raise awareness?
Consideration – Consideration can build from marketing efforts by informing you about a brand or by creating an affiliation with a brand that leads people to consider a brand they may have previously excluded from their consideration set. These ads can work at a rational or emotional level, extolling the virtues of features and benefits, or appealing to a subconscious emotional need that a consumer may have.
The ad that many thought “won” the Super Bowl was the Chrysler 300 spot. It was an a powerful montage of images from Detroit serving to represent the image of a bygone era of American greatness. It featured spoken prose that appealed to a countries' pride in its own craftsmanship, not just a blind empty mantra of patriotic patronage. Then it revealed its star, Detroit’s own Eninem, to the audience and wham, an entire generation for whom Chrysler was “dad’s” car was now thinking about a brand they never would have considered before. The ad worked in both the ways a consideration ad can work.
Now thinking of IndyCar and how effective it might be in moving consumers towards consideration. Would you consider a Honda if in five years of running the Indy 500 no Honda engine ever had a mechanical failure? Would you make sure that the tire garage priced out a set of Firestone “Magic Rings” before you made your final decision???
Purchase – As we have discussed prior, an important determinant in this portion of the Funnel is the price and relationship commitment. If the price is small and lingering commitment minimal, an ad might work on a subliminal level where staring at a store shelve the recency of an ad might break a tie between equals. But for big ticket items where touching, trial and experience are necessary a television ad won’t cut it.
If more beer is sold for consumption during the Super Bowl than any other televised event, then isn’t advertising beer during the Super Bowl akin to closing the corral after the Clydesdale got away? And Yes Paul I do think Bud wasted money here, not that they could have put the same money to use on the side pod of a car, rather for pennies on the $9M they could be the official beer of the 500, or Long Beach and had captive audiences of 350k or 140k sampling their product.
Guys – I am starting to doze off – humor me and my meandering lack of focus here…
In person events can also be an opportunity for people to “kick the tires” on products that consumers need exposure to in order to close the deal on purchase. If the IndyCar series could build its portfolio of events to a list of 20 events each averaging 100,000 people do you suppose that investing in a marketing tent at IndyCar events would be a viable marketing investment?
As far as repeat purchase goes…Experience trumps advertising. Period. Which gets me to what I consider to be the biggest waster of $ at the Super Bowl the past couple of years, and yes they are widely considered to be among the wittiest ads and everyone loves the spots. But I found myself craving a candy bar during the game. Afterwards I drove out and got myself a Reece’s Dark Chocolate.