XMOS 2004: XMOS 2004: Creative Imperatives, Creative Imperatives,

Sales ImpactSales Impact

XMOS 2004: XMOS 2004: Creative Imperatives, Creative Imperatives,

Sales ImpactSales Impact

IAB 2004 Road Show - BostonIAB 2004 Road Show - Boston

Greg StuartGreg StuartSeptember 2004September 2004

Insights from the Cross Media Optimization Study series

Test Your Internet Knowledge:Test Your Internet Knowledge:Myths or TruthsMyths or Truths

Internet’s: Truth or MythInternet’s: Truth or Myth

Q: Internet’s total reach will surpass Cable TV’s reach in 2004

Truth! Internet is projected to have greater penetration than Cable TV this year

eMarketer sourced - AC Nielsen 12/03 for Cable & NNR, comScore, etc for Internet

InternetInternet

Radio & Television

Cable TV ~ 67%

98%

Magazines 84%

Newspapers 55%

2004: 68%2004: 68%

Internet’s: Truth or MythInternet’s: Truth or Myth

Q: Online Advertising is the Fastest Growing Medium?

Truth: Absolutely!

Medium Est % Growth

Internet 15.8%Spot TV 14.3%Radio (Ntwk, Spot, Local) 11.5%Cable TV 9.9%Network TV 9.8%Syndication 9.8%Outdoor 8.4%Magazines (Consumer) 6.4%Newspapers (Nat’l & Local) 6.4%Magazines(B2B) -.1%

Source: TNS Media Intelligence/CMR2004 Estimated Growth versus YAG

Internet’s: Truth or MythInternet’s: Truth or Myth

Q: In 6 of the 12 XMOS Studies, Online was the most Cost Effective Medium?

Myth! Actually, in 9 out of 12 studies Online was proven to be the most cost effective medium in influencing a brand’s branding or sales metrics

$Source: IAB XMOS

Internet’s: Truth or MythInternet’s: Truth or Myth

Q: 50% of Households who access the Internet have Broadband?

Truth! By 2005, nearly 40 million homes, or 53% are expected to have Broadband access.

Source: eMarketer Nielsen NetRatings

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30%

40%

50%

60%

Rich M

edia Share of Ad M

arket

Broadband Share of Internet Users

Rich Media Share of Ad Impressions

Internet’s: Truth or MythInternet’s: Truth or Myth

Q: According to Tipper Gore, “Kids are great…with the Internet and all, they practically raise themselves.”

A: Myth! It was actually Homer Simpson who realized this unique capability of the Internet.

10 Myths 10 Myths

1. Online is not a Branding Medium2. Online is not a Mass Reach vehicle3. Online does not generate offline sales4. We need to get the job done in our primary media5. Online is less impactful/efficient than TV6. Our Target audience segment is not Online7. We are already Online; we have a web site8. The sales channel won’t let us use Online9. We don’t know how to compare Online and Offline10. The client doesn’t like Online

www.iab.net/2004xmos

Loves

Demands we

Mix

FactsFacts

More

“We are a people of tradition, but the past no

longer serves us. Learn from the present and

focus on the future.”

The Media Landscape The Media Landscape Has ChangedHas Changed

Have you re-evaluated your marketing mix?

The Past is OutdatedThe Past is OutdatedIn the Beginning, Media Mesmerized UsIn the Beginning, Media Mesmerized Us

There was a time when radio could hold attentionThere was a time when radio could hold attention

Television then… Television then… TV Now…TV Now…

Television then… Television then… TV Now…TV Now…

Advertising WallpaperAdvertising Wallpaper

It takes a lot of courage to release the familiar and It takes a lot of courage to release the familiar and seemingly secure, to embrace the new. seemingly secure, to embrace the new.

Alan Cohen

But there is no real security in what is no longer But there is no real security in what is no longer meaningful. meaningful.

The Key To Understanding The New Landscape:

Implication to marketers:

Set aside your assumptions and see what works.

Implication to research:Measure the effect through observation

- Don’t guess at it.

- Don’t ask consumers to guess at an ads influence!

Measuring AdvertisingMeasuring Advertising

Never ask respondents if they took a certain action because of advertising• Instead, observe the effect

• Advertising is a low involvement communication and is not generally perceived as a cause for action (even when it is)

The IAB XMOS ProjectThe IAB XMOS Project

2 ½ years, 15 major brands, 18 ad agencies, 27 online publishers,

thousands educated, million$ optimized,billion$ in sales gained

XMOS 1.0Unilever’s Dove

XMOS Branding - 1st waveMcDonald’sColgate TotalKimberly Clark Kleenex AstraZeneca NexiumXMOS Branding - 2nd waveUniversal Pictures Home Video INGVeriSignSensodyne (UK)Carlsberg (Denmark)Charlie’s Angels (Denmark)

XMO$ Sales & Branding12. Ford F-15013. P&G’s Olay14. Kraft’s Jell-O15. Nestlé's Coffee-mate

15 Public Studies to Date15 Public Studies to Date

Conducted with Numerous Agency PartnersConducted with Numerous Agency Partners

Zubi

Saatchi

Thanks to the XMOS I SponsorsThanks to the XMOS I Sponsors

Better ResultsBetter ResultsBetter ResultsBetter ResultsSame BudgetSame BudgetSame BudgetSame Budget

The Conclusion

8% to 34% increases in Awareness and Brand Image8% to 34% increases in Awareness and Brand Image

5% to +1000% increases in Purchase Intent5% to +1000% increases in Purchase Intent

Plus, increases in Sales for Ford, P&G, Kraft, morePlus, increases in Sales for Ford, P&G, Kraft, more

Summary Of XMOS ResultsSummary Of XMOS Results

Brands

DoveChickenFlatbread

Total Kleenex NexiumET Home

Video ING Verisign Jell-OCoffee-mate

Olay F150

Reco’d % Online 15% 13% 11% 10%

10-15% 19% 15% 11% 4%* 5%* TBD 6%*

Brand Awareness -- +8% -- -- -- -- ** *** -- -- -- --

Brand Image -- -- +34% +7%

+10-20%

-- -- -- -- -- -- --

Purchase Intent +14% -- +20% -- +1-5% +1491% -- -- -- -- -- --

Sales-- -- -- -- -- -- -- -- +4% +7%

In Field +5%

** Not the actual optimized level, but considered an interim increaseNot the actual optimized level, but considered an interim increase

**** Brand ran Optimal level so there was no gain from more online spendingBrand ran Optimal level so there was no gain from more online spending

****** Because of differing objectives, cross media comparison was inconclusiveBecause of differing objectives, cross media comparison was inconclusive

Why does increasing Online produce better Why does increasing Online produce better results within the same budget?results within the same budget?

Online advertising affects branding metrics

Online advertising is typically more cost efficient at producing branding gains

Online reaches those who would otherwise not get the advertising message

CoverageCoverage

EffectivenessEffectiveness

ValueValue

Lighter TV users are Lighter TV users are Heavier Online UsersHeavier Online Users

Why does increasing Online produce better Why does increasing Online produce better results within the same budget?results within the same budget?

Online advertising affects branding metrics

Online advertising is typically more cost efficient at producing branding gains

CoverageCoverage

EffectivenessEffectiveness

ValueValue

Build awareness, reinforce key image attributes and boost purchase intent

Generate sales

Brand differentiation and sales

Generate purchase intention and sales

Marketing ObjectivesMarketing Objectives

Universal Home Video – E.T. DVD ReleaseUniversal Home Video – E.T. DVD ReleaseLaunch Goals:

Communicate the release of E.T. DVD

Position brand as one of the most beloved movies of all time, with new footage & enhanced visual effect, a must buy DVD

Primary Objective: Generate purchase interest

The Power of Good Creative The Power of Good Creative

Online was Better at Affecting Online was Better at Affecting Overall Branding GoalsOverall Branding Goals

An unforgettable masterpiece for the whole family

37.5%

38.9%

43.0%

47.9%

10% 20% 30% 40% 50%

Stat sig.

Stat sig.

TV + Rich Media Overlay

TV + Online

TV Only

Pre-Campaign

Based upon what you have seen or heard, how much would you say each statement describes the movie E.T. The Extraterrestrial on DVD and video…(Describes completely/Describes somewhat)

Thinking about E.T. The Extraterrestrial, how likely are you to buy the DVD or Video

However, TV & Online do Drive Purchase IntentHowever, TV & Online do Drive Purchase Intent

Definitely will/Probably will buy (net)

21.4%

19.9%

22.7%

25.4%

0% 10% 20% 30%

Stat sig.

Stat sig.

TV + Rich Media Overlay

TV + Online

TV Only

Pre-Campaign

TV Built Awareness but Not Purchase IntentTV Built Awareness but Not Purchase Intent

0

10

20

30

40

50

60

70

80

Brand Awareness

Purchase IntentPurchase Intent

% Pre-TVTV

Campaign Post TV Campaign

Rich Media 6½x More Cost Effective TVRich Media 6½x More Cost Effective TVBased on Relative Cost Index against EffectivenessBased on Relative Cost Index against Effectiveness

Summary

Rich Media

OverlayOnline

Banners TV

DVD Release Awareness 100 1079 192

Brand Image Avg (top box) 100 339 648

Purchase Intent (def/probably) 100 315 No liftN.A.

CPM ($ per Thousand) 100 299 169

Universal: Major Gains with OnlineUniversal: Major Gains with Online

0%

2%

4%

6%

8%

10%

12%

14%

Before After

PurchaseIntent

Brand Image

ReleaseAwareness

+31%

+1491%

+107%

Absolute gains (bar chart) and % lift

2%

81%

17%6%

94%

TV

Online

Rich Media

Jell-O Ad Examples Jell-O Ad Examples

The Addition of Online Builds BrandThe Addition of Online Builds Brand

Control n= 468; Branded n=469; Coupon n= 465

Purchase Intent: The next time you buy dry gelatin mix that comes in a box, what is the probability that you will buy Jell-O gelatin mix? (Top 2 box- 11 point Juster Scale)

All significant values are at a 95% confidence level

Online advertising increases purchase intent by 7 points

Offline Offline +

Online

Purchase Purchase Intent Lift: Intent Lift:

++7%7%

Purchase Purchase Intent Lift: Intent Lift:

++7%7%

Online Sells Product OfflineOnline Sells Product Offline

*All volume numbers above are weekly volume per 100 Households

0.920.99

Control* Exposed to Online Ad

Average Weekly Volume per 100 HouseholdsMeasured in Ounces

Sales Lift: Sales Lift:

++7.5%7.5%

Sales Lift: Sales Lift:

++7.5%7.5%

Incremental Volume

+.1 oz Online advertising resulted in a 7.5% sales volume lift

Jell-O Sales ROIJell-O Sales ROI

23

53

-4

-21

-51

30

83

Online frequency

=9.8

Online frequency

=7.0

Calculated National Theoretical Recommended

frequency level

ROI: Payback of Each Media Vehicle per Dollar Spent

Above average

ROI

Below average

ROI

Direct TV

Direct Print

Radio Trade FSI

Online

The Coffee-Mate Online CampaignThe Coffee-Mate Online Campaign

43.0%

50.0%

The Addition of Online Builds BrandThe Addition of Online Builds Brand

Brand Image: Considering everything you have seen or heard about Coffee-mate Non-Dairy Liquid Creamer and your own personal opinions, please indicate the degree to which you Agree or Disagree with the following statements: (Top-Two box- 5 Point Scale)

Online advertising increases five out of eight key metrics

Offline Offline +

Online

Average Average increase increase

++7%7%

Average Average increase increase

++7%7%

Control n= 468; Branded n=469; Coupon n= 465

Results shown are for branded campaign using an average of all attributes

*All significant values are at a 95% confidence level

And Again, Online Builds SalesAnd Again, Online Builds Sales

*Control Panel=606 Exposed Panel=1,127. All volume numbers above are weekly volume per 100 Households**Statistically Significant at the 95% confidence level

12.914.2

Control* Exposed to Online Ad

Average Weekly Volume per 100 HouseholdsMeasured in Ounces

Sales Lift: Sales Lift:

++10%10%

Sales Lift: Sales Lift:

++10%10%

Online advertising resulted in a 10% sales volume lift

Incremental Volume

+1.3oz

Coffee-mate Sales ROICoffee-mate Sales ROI150

-20-29

28

Online Recommended

Level

ROI: Payback of Each Media Vehicle per Dollar Spent

TV

Consumer Promotions Trade

Online

Above average

ROI

Below average

ROI

The All New 2004 The All New 2004

Ford F-150Ford F-150

“The Most Important Launch In the History Of Ford”

- Bill Ford

One Day Reach = 40%!!!One Day Reach = 40%!!!Digital

Roadblock

TV vs. Online RoadblocksTV vs. Online Roadblocks(Purchase Intent)(Purchase Intent)

Both are effective

But the roadblock

is more cost efficient

Individual Media Effects Led by OnlineIndividual Media Effects Led by OnlineBranding Metrics Summary – 1Branding Metrics Summary – 1stst Two Mos. Data Two Mos. Data

TVMaga-zines

Road-block Online

Ad Recall +3pts +13pts +6pts +15pts

Familiarity Not Sig +11pts Not Sig +10pts

Avg Brand Image Attributes Not Sig +8pts Not Sig +9pts

Purchase Consideration +5pts +6pts +4pts +6pts

Shopping Not Sig +4pts +6pts +6pts

Purchase Intention (unaided) +2pts +3pts +5pts +12pts

Purchase Consideration Impact Efficiency Purchase Consideration Impact Efficiency Relative Cost IndexRelative Cost Index (ROMO)(ROMO)

Brand Metric:Purchase Consideration (top 2)

Relative Cost Index

Sample Cost

TV 2153 $21.53

Magazine 354 $3.54

Roadblock 196 $1.96

Online 100 $1.00

Interpretation: If it cost Online $1 (indexed of 100) to increase purchase consideration, then it cost $1.96 for the roadblock, $3.54 for magazine and $21.54 to TV to achieve the same increase.

Online is a MAJOR contributor to successOnline is a MAJOR contributor to success

Intern

etIn

ternet R

eachR

each

55%55%

or2.22.2

MillionMillion Consumers Consumers interested in interested in buying F-150 buying F-150 because of because of Online adsOnline adsOnline’s ImpactOnline’s Impact

==P

urch

aseP

urch

ase In

tentio

n In

tentio

n

+6.8%+6.8%

•Weighted average of Roadblock and Online (impact of roadblock x reach of roadblock + impact of online in-market + reach of in-market) / sum of reach = weighted impact

Ford Sales AnalysisFord Sales Analysis

500,000 F-150’s sold annually

Online was 6% of sales, or 30,000 trucks

Results in $750,000,000 annual F-150 sales

Tracked Buying of Control & Exposed Group

Tracked Buying of Control & Exposed Group

@ $25,000 per Truck

@ $25,000 per Truck

What if Ford Ran Increased Online?What if Ford Ran Increased Online?

Online included Roadblocks & In-Market

Plan would then sell +5%, or 25,000 trucks

Results in additional $625,000,000 annual sales

Optimization and Judgment suggested

+6% increase in Online

Optimization and Judgment suggested

+6% increase in Online

@ $25,000 per Truck

@ $25,000 per Truck

The Evidence is In: The Evidence is In:

Online DRIVES Sales!Online DRIVES Sales!

Sales lift:Nexium 6.0%Jell-O 7.5%Coffee-mate 10.0%Olay 12.5%*Ford F-150 21.0%**

*Mid-point data only. Campaign is still in field, Reported % increase in household buy-rate. Actual volume increase were higher.** 28% actual lift, 21% represents a more conservative figure to account for heavier media delivery

The The Power of Power of

Good CreativeGood Creative

How Bad is Online Creative?How Bad is Online Creative?

Of the last 5 XMOS programs, creative testing was done prior to the study launch

Only 1 brand’s ads required no adjustment

2 brands found 1/2 the ads were not effective

Diluting the effectiveness of the campaign

2 brands discarded ALL ads & started all over

Both developed better ads that scored much better

Nothing Else Matters if Creative is WrongNothing Else Matters if Creative is Wrong

BB

AA

Better creative can make the difference between success and failure

Source: XMOS

Colgate Purchase Intent for Online OnlyColgate Purchase Intent for Online Only

Ad B, 2

Ad A, 20

0 5 10 15 20 25 30

PurchaseIntent

Percent that Intend to Buy Colgate

*sig

Better creative can make the difference between success

and absolute failure

Ad AAd A

Another Case in Point: OlayAnother Case in Point: Olay

Online AdsOnline Ads

AD4

AD5

Measuring Effectiveness:Measuring Effectiveness:Creative TestingCreative Testing

Branding Metrics #4

Awareness- Unaided not sig

Awareness- Aided +3%

Purchase Probability (top 2 box)* not sig

Average Branding Attributes not sig

Message Association (love the skin your in) +4%

* Ad 5 show directionally positive increases in purchase probability

Point difference over control

Revised Ads Produced Better ResultsRevised Ads Produced Better Results

Try the “Glance test”

Individual Media EffectsIndividual Media EffectsBranding Metrics

Online (revised)

Awareness- Unaided +11%

Awareness- Aided not sig

Average Branding Attributes +9%

Purchase Probability (top 2 box) +12%Offline n =573

Offline +Online n =547

Point difference over control

Why does increasing Online produce better Why does increasing Online produce better results within the same budget?results within the same budget?

Online advertising affects branding metrics

Online advertising is typically more cost efficient at producing branding gains

Online reaches those who would otherwise not get the advertising message

CoverageCoverage

EffectivenessEffectiveness

ValueValue

The Old Marketing Mix Is The Old Marketing Mix Is NO LONGER OPTIMALNO LONGER OPTIMAL

Billions are lost due to sub-optimal marketing mix

What Does XMOS Really Mean to the Industry?What Does XMOS Really Mean to the Industry?

There is $17 Billion to

$85 Billion$85 Billion of

InefficiencyInefficiency in the

U.S. Advertising Marketplace today

Assumes total U.S. Advertising Budget of $250 Billion and a minimum recorded Assumes total U.S. Advertising Budget of $250 Billion and a minimum recorded gains from optimization of 7% for KCC (250B x 7% = $17B) up to 34% for Colgate gains from optimization of 7% for KCC (250B x 7% = $17B) up to 34% for Colgate (250B x 34% = $85B)(250B x 34% = $85B)

What If Brand Optimized & Competitor Didn’t?What If Brand Optimized & Competitor Didn’t?Assumes category growth 3%, optimized sales increase of 11%Assumes category growth 3%, optimized sales increase of 11%

Optimized Non Optimized

Brand’s Share Brand’s Share

Starting Share 25.0% 25.0%

Year I 26.9% 24.4%

Year II 29.0% 23.7%

Year III 31.3% 22.9%

Year IV 33.7% 22.1%

Year V 36.3% 21.2% Overall Sales ChangeOverall Sales Change +69%+69% -2%-2%

Example assumes overall category growth of 3% and average annual gain in sales based on XMOS Example assumes overall category growth of 3% and average annual gain in sales based on XMOS

studies gain of 11% in total sales growth due to Online. All other variables assumed constantstudies gain of 11% in total sales growth due to Online. All other variables assumed constant

The Key To Improving Marketing ROIThe Key To Improving Marketing ROI

Set aside old, outdated assumptions and measure what produces the best ROI

If you hope to make advertising more profitable, you had better measure what’s working, and what’s not

Beware of Beware of Media Planning InertiaMedia Planning Inertia

Updating last years mix

with minor tweaks is NOT

a solution

Instead, use zero based media planning

Accountability is not measurement…

It is doing something about the measurement.

Make Sure EVERYTHING Works!Make Sure EVERYTHING Works!

Same Media Budget Same Media Budget 310% Increase 310% IncreaseSource: InsightExpress

Imps (M)Brand

PerformanceContri-bution

Creative 1 10.0 -15.9% (1.59) Creative 2 10.0 13.8% 1.38 Creative 3 10.0 11.3% 1.13

Total 30.0 0.92

Imps (M)Brand

PerformanceContri-bution

Creative 1 -- -- --Creative 2 15.0 13.8% 2.07 Creative 3 15.0 11.3% 1.70

Total 30.0 3.77

Next Steps: New Round of Studies Next Steps: New Round of Studies

XMO$XMO$Sales & BrandingSales & Branding

Seeking 4 marketers to measure SALES & Branding impact of all media.

The IAB will pay half the cost of each study

See greg@iab.net or doron@iab.net

Closing ThoughtsClosing Thoughts

Summary Of XMOS ResultsSummary Of XMOS Results

Brands

DoveChickenFlatbread

Total Kleenex NexiumET Home

Video ING Verisign Jell-OCoffee-mate

Olay F150

Reco’d % Online 15% 13% 11% 10%

10-15% 19% 15% 11% 4%* 5%* TBD 6%*

Brand Awareness -- +8% -- -- -- -- ** *** -- -- -- --

Brand Image -- -- +34% +7%

+10-20%

-- -- -- -- -- -- --

Purchase Intent +14% -- +20% -- +1-5% +1491% -- -- -- -- -- --

Sales-- -- -- -- -- -- -- -- +4% +7%

In Field +5%

** Not the actual optimized level, but considered an interim increaseNot the actual optimized level, but considered an interim increase

**** Brand ran Optimal level so there was no gain from more online spendingBrand ran Optimal level so there was no gain from more online spending

****** Because of differing objectives, cross media comparison was inconclusiveBecause of differing objectives, cross media comparison was inconclusive

A bit of advice given to a young Native American at the time of his initiation:

‘As you go the way of life, you will see a great chasm.

Joseph Campbell

Jump.

It is not as wide as you think.’

ThanksThanksThanksThanks

IAB 2004 Road Show - BostonIAB 2004 Road Show - Boston

Greg StuartGreg StuartSeptember 2004September 2004

greg@iab.net