ad effectiveness.gap
TRANSCRIPT
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Media Effectiveness:
Measuring Ad Creative & Long-Term Ad EffectsNew Developments in Measurement and Analytics
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Forward
• Defining Long-Term Ad Effects (LTAF)• Model Architecture
• Review of Media Spend
• Media Mix Model Results
• Results and Insights– Decomposing Sales
– Role of Advertising and It’s Components• Ad Spend• Ad Creative
• Long-Term Ad Effects
– Marketing Variance (Due-to)
– Marketing ROI & Assumptions
• Implications & Lessons
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Defining Long-Term Ad Effects
• This exercise will be a media-mix model. An important and different component of our
models is a derived long-term ad effect variable. LTAE are thus defined as follows:
– Long-Term Ad Effects (LTAE), are the incremental sales generated from customers who were initially
acquired via media/advertising messages, over the lifetime of that customer. These sales are
attributed through repeat purchases and revenue streams generated by these customers over their
lifetime with a brand. Once a customer has been acquired, LTAE reflects the value that these
customers generate over their lifetime as a customer.
References:
Leslie A. Wood, David F. Poltrack, Measuring the Long-Term Effects Of Television Advertising, Journal of Advertising Research, June 2015
Ataman, Van Heerde, Mela, Building Brands, Marketing Science, Nov.-Dec, 2008
Ataman, Van Heerde, Mela, The Long-term Effect of Marketing Strategy on Brand Performance, Emory University Zymaninstitituteof Brand Science, 3 July 2006
4Model Architecture, Brand Alpha Brand HBA
Below reflects our inputs formulating the model for predicting Neurogena HBA Brand weekly sales.
Short-Term TV Media
Short-Term Digital Display & Video Ads
Short-Term Radio Media
Short-Term Print Media
Long-Term Ad Effects all Media
Retail SKU Distribution
Store Merchandising- Features
Store Merchandising-Displays
Store Merchandising-Features + Displays
Seasonality
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Brand Alpha HBA
Weekly Retail Sales by SKU1/3/15 – 7/16/16
Retail SKU Price
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Brand Alpha Retail Sales and Ad Spending
• For Year ending 7/16/16, Brand Alpha generated $1.027 Billion in revenue and 106.4 million units, on $138 million of total ad spend
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500,000
1,000,000
1,500,000
2,000,000
2,500,000
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2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000'2
015.
01
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5.05
'201
5.09
'201
5.13
'201
5.17
'201
5.21
'201
5.25
'201
5.29
'201
5.33
'201
5.37
'201
5.41
'201
5.45
'201
5.49
'201
5.53
'201
6.04
'201
6.08
'201
6.12
'201
6.16
'201
6.2
'201
6.24
Un
it S
ale
s
Me
dia
Sp
en
d
Brand Alpha Unit Sales & Media Spend
Online Display Online Video Print Radio TV Unit.Sales
6We employed a 10% data holdout to validate the model’s
ability to predict. Overall results excellent
(500,000)
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500,000
1,000,000
1,500,000
2,000,000
2,500,0001
/3/2
015
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Brand Alpha Actual Sales v. Model
Variance
Model
Actual
Bl ind Holdout
Overall R2
Blind Holdout R2 MAPE
Model Stats. 86.9% 86.5% 1.8%
7For Brand Alpha, Long-Term ad effects among the highest
seen, at 15X of the Short-Term Media Impact
66.05%
7.29%
1.82%0.50%0.21%0.02%1.45%
22.67%
33.95%
Incremental Contributions to Total Brand Alpha Sales
Baseline Dist.@Min Mdsg.Ftr Mdsg.Displ
Mdsg.F + D ST Adv.Spend ST Adv.Creative Long-Term Adv
8Current Quarter v. Year-Ago performance shows Brand Alpha
gaining sales of +5.6%. Most of this growth can be ascribed to
better ad creative and stronger Long-Term ad effects.
1.1%
-1.1%
0.5%
0.0%
1.2%
3.8%
-0.1%
0.1%
0.0%
-2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0%
Baseline
Distbtn.@Min
Price
ST Adv.Spend
ST Adv.Creative
Long-Term Adv
Mdsg.Ftr
Mdsg.Displ
Mdsg.F + D
Brand Alpha Current Quarter v. YA Variance Due-To
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ABX scores do correlate to individual ad sales uplifts
• Female ABX “Call-to-Action” scores show a significant (95%) correlation to ad sales performance
R² = 0.4349
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20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
-40% -20% 0% 20% 40% 60% 80%
FM A
BS
All
CTA
Media Correlaton to Sales
10Improving Ad Creative has also helped boost the large gain
from Long-Term Ad Effects
(10,000)
10,000
30,000
50,000
70,000
90,000
110,000
130,000
150,000
200,000
250,000
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400,000
450,000
500,000
550,000
1/3
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Ad
Cre
ativ
e C
on
trb
tn
Lon
g-Te
rm A
d E
ffe
cts
Co
ntr
btn
Brand Alpha Sales Due-to Ad Creative & Long-Term Ad Effects
Long-Term Adv ST Adv.Creative
Correl = 70%
11The financials of advertising dramatically change from -
$100K to 2 .7 million dollars!
($500)
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Short-Term Effect Only With Long-Term Effects
($100)
$2,720
Brand Alpha Annual Ad Net Returns
* Assumes 20% EBITDA/Sales Margin
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Implications and Lessons
• Long-Term Ad Effects (LTAE) are the key to positive ROI on advertising spending. For Brand Alpha, this is among the highest LTAE found and equates to about 23% of annual sales; and was 15X the short-term ad effect.
• Brand Alpha’s current retail sales growth is quite strong, with over +5.6% gain versus the prior year.
• Along with Stronger Ad Creative, The LTAE was a major driver of quarterly growth versus the prior year. In the case of Brand Alpha, improved ad creative was a major driver of improved LTAE.
• ABX scores shown to predict individual ad sales uplifts
• The very high returns on Brand Alpha advertising suggests under-investing.
• The only negative for Brand Alpha for the quarter was due to declining distribution and availability on some SKUs.
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