fmcg check out research

8/10/2019 FMCG Check Out Research

1/11

CheckoutAnROIanalysis

oftheFMCGsector


2/11

Themissinglink

Whilsttherehavebeenmanythousandsofbrandingstudiesundertakentoaddresstherstpoint,considerablylessattentionhasbeenpaidtothesecond.Studiesofonlinemarketingeffectivenesshavesofarstruggledtodemonstrateaclearlinkwithin-storebehaviour.

Intheabsenceofaprovenlinkbetweenonlinecampaignsandofinesales,FMCGmarketershavebeenreluctanttoshiftmarketingbudgetstotheweb.IntheUK,onlinedisplaycurrentlyreceivesapproximately1%ofFMCGbrandsmediaallocation;TVgetsaround59%,Print26%,Outdoor8%,Cinema3%,andRadio3%*.WiththecurrenteconomicclimateincreasingthefocusonROI,demandsforproofaremorepressingthanever.

MicrosoftAdvertising,inpartnershipwitheconometricexpertsBrandScience,lookedcarefullyathowthecaseforonlinedrivingofinesalescanbestbemade.OurapproachisEconometricModelling,atechniqueusedforover25yearsbyFMCGbusinessesintheUK.EconometricModellingprovidesacredible,cross-mediaviewofmarketingreectingtodaysmedialandscape.OurstudyincludedallofthemediachannelsusedtoasignicantdegreebyFMCGbrands.

OnlinesearchadvertisingrepresentsatinyproportionofFMCGspend,andforthisreasonithasnotbeenincludedinthestudy.

lProvethattheonlinechannelcanbuildbrandslProvethatitcandriveofinesales.

Theadvertisingcommunityhastwolong-standingdemandsofonlinemarketing:

WhatisEconometrics?EconometricModellingtakesitsnamefromitsoriginalpurposetounderstandeconomies.Ithasotherapplicationstoo,oneofwhichistheimpactofmarketingonsales.

Withitsmathematicalmodels,statisticsandcomplexmeasurements,Econometricsisoftenseenasthedryendofmarketing,theremitofnumber-crunchers,yetitscapabilityforprovingtheimpactofonlineonofinesalesisnothingifnotexciting.Econometricsisaboutdata:vastamountsofgoodqualitydata,collectedoverlongperiodsoftime.Outofthismassofdata,Econometricsidentiesabrandsdifferentdrivers.Someofthesearecontrollable,suchaspricingstructuresormarketingactivities;somearenotcontrollable,liketheweather,orcompetitoractivity.Econometricsshowshowthesedifferentdriversaffectperformance,whetherperformanceismeasuredinmarketshare,customeracquisition,short-termsales(asinourcase)oranyothermetric.

OnekeyadvantageisthatEconometricscanseparateoutthebranddrivers,quantifytheirindividual

effectsandarbitratebetweenthem.Critically,itcanreneitselfovertimetomakemoreaccuratepredictions.Imaginearowofdials,eachonerepresentingabrandsdrivingforces.EconometricModellingallowsyoutoturnthedialsinanycombinationandaccuratelypredicthowthesechangeswouldaffectperformance.

*Source:NielsenAdDynamixJan-Dec09


3/11

MarketShare

CustomerAcquisition

HaloEffects

SalesMediaActivity

Pricing(includingin-store

promotions)

Weather

CompetitorActivity

D

rivers

ApplyingEconometricstoFMCGsalesOurstudyaggregatesdatafromover100FMCGcampaigns,representativeofthesectorasawhole.Eachbrandanddatasetincludedinthesamplecontainsatleasttwoyearsofactualhistoricsalesdataandtakesapproximately500hourstomodel.BrandSciencelookedattheeffectofalldriversincludingmediaactivityonshort-termsales,modellingthehistoricvariationinactualsalesgurescollectedonaweeklybasisoveratwo-yearperiod.

Ourstudyfoundthatmediaactivitycontributesaround6%ofallsaleswiththeremaining94%resultingfromfundamentalssuchasstockdistributionandpricing(includingin-storepromotions).This6%sliceofsalesvariationtheeffectofmediaactivityonsalesisthebasisofouranalysis.BrandSciencesEconometricapproachquantiestheeffectsofdifferentmedia,deliveredatspecictimesindifferentcombinationsandweights,onshort-termsales.Bycomparingthemathstotheactualsalesgures,themodellingprocessisrenedovertime.

TheanalysisispredominantlydrawnfromtheUKbutincludessomestudiesundertakeninEurope,toincludeasmanycampaignswithameasurableonlinecomponentaspossible(35intotal).

Moreonthatlater.

Thesheeramountofdatameansthattheanalysisisextremelyrobust.Onaverage,themodelexplains89%ofthesalesvariationrecordedforeachcampaigninoursample.

Perform

ance


4/11

ThemediasplitinoursampleisbroadlyrepresentativeofactualspendacrosstheFMCGsectorasawhole,asreportedinNielsendata

Inaggregateamedian89%ofsalesvariationwasexplainedbythemodels

Salesp

erweek

Time

BrandSciencestudy:140+FMCGcampaigns

NielsenspenddataUK:FMCGadvertisersspendingover1monadvertising

Sales Models

66%71%

22%19%

1% 3%1% 1%2% 2%5% 7%

TV

Cinema

Print

Radio

Outdoor

Online(displayonly)


5/11

Reportconclusion:onlinedelivers

greatestROIforshort-termsales

Theoverallconclusionofourstudyisthatonlineisthemostefcientmediumfordrivingshort-termsalesintheFMCGsector,asrecordedinactualsalesdata.*Onlinereturns1.68inactualrecordedsalesforevery1invested.Yetdespitethis,only1%ofFMCGadbudgetsarespentonline.

Bycontrast,somemediawithagreatershareofspendshownegativeROI.Theroleofthesechannelswithinthemediamixisbestunderstoodintermsoflonger-termrevenuegains.

TheROIofindividualmediaforshort-termFMCGsales1.80 1.68

1.231.16

0.780.61 0.60 0.54

1.60

1.40

1.20

1.00

0.80

0.60

0.40

0.20

0.00Online Cinema NewspaperOutdoor TV Radio Magazines

Averag

eR

OI

Optimisingonlinespend:acloserlookatonlineROI

Whileniche/targetedonlinespendisveryefcient,asaruleonlineROIisscalable,increasingwithgreaterspend

2.12

1.04

1.35

1.55

2.00AverageonlineROI

2.50

2.00

1.50

1.00

0.50

0.00

1stquintile:

Under20k

Basedonameta-analysisofFMCGeconometricstudiesbyBrandScience

2ndquintile:

20-40k

3rdquintile:

40-140k

4thquintile:

140-300k

5thquintile:

300-800k

Average

on

line

ROI

*Thisispartlyafunctionofthelawofdiminishingreturns.IfonlinemediaallocationincreasedwellabovetheFMCGsectoraverageof1%,wewouldexpectsomereductioninonlineROIbuteveniftheROIhalves,itwillstillbemoreefcientthanmosttraditionalmedia.


6/11

TheEconometricmodelpicksupanystatisticallysignicanteffectonsalesregardlessofhowsmallitis.Spendsofupto20Karethemostefcientastheytendtobehighlytargetedandthereforehaveasignicantimpactonsalesrelativetoinvestment,albeitonasmallscale.Asaresult,low

onlinespenddeliversthehighestROI,butreturnsalowoverallrevenue.However,thekeyndingtoemergeisthescalabilityofonlinespend.Asspendincreases,ROIincreasesandso,atanincreasingrate,doestheoverallrevenuereturned.Withintherangeofonlinespendsanalysedbyourstudy(andwithinthebudgetscurrentlyspentonlinebytheFMCGsector)thereisnoevidenceofdiminishingreturns.Thisanalysissuggeststheoptimalonlinespendisyettobereached,andsuggestsaneedforfurtherresearchonmuchhigheronlinespends,tounderstandwherethatoptimalpointis(thezenithoftheROIcurve).Incomparison,asimilaranalysisshowsthatTVsoptimalspendforshort-termsalesisinthemid-level.

0.80

1.19

1.10

0.56

AverageTVROI

0.75

1.40

1.20

1.00

0.80

0.60

0.40

0.20

0.00

1stquintile:

Under20k

Basedonameta-analysisofFMCGeconometricstudiesbyBrandScience

2ndquintile:

30-500k

3rdquintile:

500k-1.4m

4thquintile:

1.4-2.7m

5thquintile:

2.7-3.3m

Average

TV

ROI

TVROIsuggeststhattheFMCGsectoroverspendsonTV

AnalysingtheROIcurve

SpendhasreachedoptimallevelsforROI

0

ROI

AdvertisingspendSpendisnolongerdeliveringsalesEvenatcurrentspendlevels,

OnlineROIshowsscalablity

SpendcanstillbedeliveringsalesbutatlowerROIthantheoptimalpoint

Asspendincreases,ROIisstillincreasing


7/11

OnlinecreatessynergiesbetweenmediaBysplittingoursampleintothosecampaignsthatincludeonlineinthemediamixversus

thosethatdonot,startlingdifferencescanbeseen.Therearetwoareasofsynergies.

First,thesynergycreatedbetweenonlineandothermediaextendsthelengthoftimethatcampaignsdelivershort-termsalesimpact.Thisisthelengthoftimeittakesforthemarketingcampaignseffectonsales(sometimescalledthecarryoverrate),tofallfrom100%to5%.Ifacampaigndelivered100salesimpactsinweek1and50inweek2,thecarryoverratewouldbe50%.Asthesalesimpactsdiminishesweekonweek,thecarryoverrateisadjusteduntilitreaches5%,whereuponthecampaignseffectisassumedtohavestopped.Themoresuccessfulthecampaign,thelongerthistakes.ForonlineFMCGcampaigns,theaveragelengthoftimeis27days.

45

33

27 27

2119

13

0

5

10

15

20

25

30

35

40

45

50

TV Magazines Online Outdoor Cinema Newspaper Radio

Average

days

ofsales

impact

Onlinesaverageduration(ofsaleseffect)isashigh

asoutdoor,higherthannewspapersandradio

Second,onlineisaneffectivesupportmediumtoothermedia.AddingonlinetothemediamixhasapositiveimpactontheROIofTV,Newspaper,Outdoor,RadioandCinema.Onlinenot

onlydeliversexcellentROIefciencyitself,butitmakesothermediaspendworkharder.

Weseeasignicantdifferencebetweenthosecampaignsthatincludeonlineinthemediamixandthosethatdonot.Whereonlineispartofthemediamix,thelengthofthesaleseffectimprovesformostmedia:furtherevidencethatonlinemakesothermediaworkharder.


8/11

Noonline Online

Addingonlineincreaseslengthofimpact

fornearlyallmedia

43

1410

14

27

15

32

24

32

50

0

10

20

30

40

50

60

TV Newspaper

+16% +92% +33% +50% +128%

Outdoor Radio Cinema

Average

days

ofsales

impact

0.700.54

0.390.48

0.840.98

1.92

0.97

1.29

1

0.0

0.5

1.0

1.5

2.0

2.5

TV Newspaper

AddingonlineincreasesROIofnearlyallmedia

+30% +56% +33% +151% +300%

Noonline Online

Outdoor Radio Cinema

Average

ROI

Interestingly,magazinesdidnotshowsynergywithonline.Thisislargelybecausemagazines,especiallymonthlytitles,arenotasimmediatelyimpactfulonsales.Newspaperadsareoftendeployedclosetothetimeofpurchase(i.e.keyshoppingdayslikeweekends)andtheperformanceresultisthereforemoreimmediate.


9/11

Lookingforwards:

whatisonlinesoptimalshare?Pullingthesendingstogether,itispossibletoquantifytheoveralleffectonlinehasonFMCGROI.Analysingthesamplebytheshareofspendthatwasallocatedtoonline,arecommendationemerges.

0.86

1.18

1.41

1.60

1.40

1.20

1.00

0.80

0.60

0.40

0.20

0.00

%Onlinespend


10/11

Walkingthetalk:examiningtheimpactofshiftingspend

Tolookattheeffectsofincreasingonlinesshare,weeconometricallymeasuredasingleFMCG

campaignwitharelativelyhighallocationofmediaspendgiventoonline.ThiswasCadburysJivebrowcampaign,whichranintheUKtopromotesalesofthebrandsDairyMilkproduct.Onlinereceived7%ofmediaspend,mostofitontheMSNHomepage(6%).Theonlineactivitywasdeeplyintegratedintotheoverallcampaigntomaximisesynergiesacrossmedia.Aspartoftheonlinecampaign,a24-hourtakeovereventoftheMSNHomepageinviteduserstosubmittheirownJivebrowvideosinaninteractivebrandedexperience.

Onlinemediawasthemostefcientchanneloverall,delivering13%ofincrementalsalesfrom7%spend.Furthermore,diverting4%oftheTVspendtotheMSNhomepageeventwouldhaveincreasedthecampaignprotabilityby11%

0

50

100

150

200

250

300

350

400

1.80

ROIindex

(100=

totalcampaign

ROI)

Ofinemedia

100

Onlinemedia TOTAL

362

81

Shareofspend

Onlinemedia7%

Onlinemediawerealmost4.5timesmoreefcientthanofinemedia

fordrivingshort-termsalesofCadburysDairyMilk

Ofinemedia93%


11/11

RecommendationslOnlineperformswellforFMCGbrands, deliveringstrongandscalableROI.

lLeveragingonlinessynergisticeffects isthesimplestwaytooptimise overallcampaignROI.

lAdjustingthemediamixtoincrease onlinesallocationwilldeliverscalable increasesinROIwhilstincreasingthe durationofcampaignimpact.

lMicrosoftAdvertisingoffersaunique combinationofmassreachand audiencetargetingthatisideally suitedtodrivingFMCGsales.

Tondoutmore,visit www.microsoftadvertising.co.uk [email protected]

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