Tuesday, 23 December 2008

The world's most interesting research presentation

This year's MRG conference had - in the usual way of conferences - a few really good papers, some average ones and a couple that explained how an extensive new research study had found out that bears after all, do sh*t in the woods.

All the research papers though, good and bad, had one thing in common. The first five to ten minutes of a twenty minute slot were spent explaining how a survey group was recruited, how many people were in the sample and what demographics they represented.

Methodology slides might be fair enough at the MRG. It is a research conference after all, but we do it to our clients too.

Whenever that slide goes up at the beginning (and it always goes up at the beginning) about how respondents were recruited and who they are, I can hear the presenter saying,

"we've got some really interesting findings for you, but you can't see them yet. We've only got an hour, so I'm going to spend the first ten minutes telling you that this study was done the way these studies are always done. And by the way, you know all this already, because you're paying for the project and it was in the proposal you signed off."

It's unnecessary. The client has appointed you to do their research because they believe that you know what you're doing. They've come into the room assuming you know what you're doing and telling them about methodology is boring at best.
At worst, you're going to prompt an awkward question and then confuse half the room trying to explain a technical point about significance testing.

News correspondents don't start their reports by explaining how they booked a flight and found a hotel. Survey methodology is what appendices were made for. Let's bury the dull stuff at the back and get on with something interesting.

Friday, 19 December 2008

Why you might not love highly targeted advertising

All this internet ad targeting is brilliant. You can make products pop up on gmail depending on what an email was about, and Facebook keeps trying to sell me motorbike insurance because it knows I need it. Probably something else for you, but that's exactly the point.

The better you target, the higher your conversion to clicks and sales. It's win-win.

Except that it isn't. Not if you sell something low-priced, in a market with several competitors - i.e. everybody who makes supermarket goods.

Imagine a world where ad targeting is perfect. On TV, on the radio, everywhere. It's possible to put your product in front of consumers exactly when they're thinking about buying and persuade them to buy you.

We're not all that far away*, as TV viewing moves online through services like iplayer and kangaroo, why would you show everyone the same copy in each ad break? Come to that, why would you even show the same number of ads?
For advertisers, it will be like buying Google searches - you outbid your competitors, win the slot and win the customer.

In a world like that, some brands would pay an awful lot for an advertising slot. We can already see this on Google searches; bids for high margin items like credit cards and mortgages are way higher than for other categories.

This leaves FMCG marketers with something of a problem. The products they advertise are low-margin and their market is everybody. At the moment, these types of brands that have very wide target audiences can dominate the broadcast media, because broadcast media don't target very well. You hit everybody with your ad, like it or not, and that means a lot of wastage if you sell to a minority of people.

Back to the motorbike insurance example, you never see bike insurance ads on the TV outside of advertising during MotoGP races and even then it's more likely to be sponsorship than in-break spots.
But if motorbike insurance companies could target just the bikers with TV spots, or even better just the bikers whose insurance is coming up for renewal, then they'd pay a lot more than somebody who is trying to sell those bikers baked beans, or frozen ready meals.

In that world, could FMCG brands even afford to advertise on the broadcast media? Wouldn't somebody else always be willing to pay more for the slot?

* OK, so we're really quite far away, but it's fun to speculate about what would happen.

Sunday, 7 December 2008

The Red Queen

It's all about return on investment. You can't blow millions on an advertising campaign without showing that it's had some kind of effect - so how do you show that sales have gone up and your TV spots were worth the money?

You use econometrics.

An analyst - somebody like me - builds a statistical model, which proves that while your campaign was on air, sales went up by 5%. Job done. Except that for the advertising to be profitable, sales needed to go up by 15%.

What's suprising is that this happens all the time. Econometrics 'proves' that advertising is unprofitable, companies worry about that for a month or so and then carry on running ads anyway.

Some of the time the stats are probably right and sales uplifts really are disappointing, but they can't be right all the time surely? Or a few companies would have worked out by now that they'd make more profits without advertising and the stock market would be punishing any who were still throwing their money away.

Econometrics must be missing something. The real sales effect must be larger than marketing models say it is.

This is where the Red Queen comes in. Econometric models measure things changing - it's how they work. The statistics are a complex way of looking at how much product is sold in a week when advertising is running, compared with when it isn't.

In a mature market, where everything is fairly stable and all the brands are advertising at about the same level, econometrics will say that advertising uplifts are small almost every time.
Is econometrics right? Lets think about what would happen if one of the brands suddenly stopped running ads. Nothing happens in the first week, or in the first month but after a longer period of time, sales might start to slowly slide away.

Econometrics can't see this bit of the return on investment. You could say that market mix models can only measure the aggressive bit of your advertising - the bit that's stealing from competitors and winning new customers. They can't measure the defensive part that stops competitors stealing from you. And that defensive part could be much larger.

Statistical models have their place, but they're just one piece of the puzzle. Before you had a model, you didn't know anything about your advertising ROI. Now that you've got a model, don't let the analysts pretend that you know everything about it.

Red Queen? You can run as fast as you like, but if you're staying still then how can we measure you moving?