long term ad effectiveness measurement --- t he single source solution

Copyright © 2014 Nielsen Catalina Solutions • Confidential & Proprietary

Long Term Ad Effectiveness Measurement ---

The Single Source SolutionSeptember 19, 2014 – Marketing Research Council

Dave PoltrackChief Research OfficerCBS Corporation

PresidentCBS Vision

Leslie WoodChief Research Officer

Nielsen Catalina Solutions

Copyright © 2014 Nielsen Catalina Solutions • Confidential & Proprietary 2

Agenda

• Background• New Work – Methodology• Case Study – Five Brands• New NCS Solution – Long Term Effects


Background – Original Study• Ad Works I (1991) showed long-term effect of advertising to

be the 2x short-term sales effect• Still used anecdotally• Suggests only half the value of advertising is counted by mix

models – Advertising may get fewer marketing dollars vs. promotion,

trade, etc.• Allows for no variation by campaign, medium, brand/category,

or long-lasting branding effects

• It’s time for a new look!


Background – Current Research• NCS conducted a five-brand study, including Kellogg’s, on the

Long-Term Effect of Advertising• Presented at ARF 9.0 June 2014• Sponsored by CBS

• Marketing Accountability Standards Board (MASB) – Study with four brands, using the NCS Single Source Methodology (Summer 2014)

• New CRE (Center for Research Excellence) Study: Towards A More Complete Measure Of Advertising Value and ROI

• Study will lead advertisers to new, valid methods of assessing long term value

Expert Interviews

Literature Review

“Good Practices”

Case Studies

White Paper

Process


Value of Long term effects

Over the past 25 years the balance of spending between advertising and promotion has shifted dramatically• In part due to ability to measure the impact of promotion• Advertising has been evaluated only on the short-term

• While studies 20 years ago showed that the long term is twice the size of the short term!

“Measurement and analysis that consider only short-term impact may put advertising at an unrealistic disadvantage when allocating marketing resources to maximize long-run profitability”

Hanssens 2011

Hanssens, D. M. (2011). "What Is Known About the Long-Term Impact of Advertising." 1-19 MASB What is know Series


Measuring the Long Term

Benefits of Having Actual Long Term Measured:A. Having real measures provides insights into what drives long termB. Insights drive better decisionsC. Better decisions drive higher effectsD. Having real measures provides insights into budget setting

“If an advertising test was successful in Year 1, there would continue to be long-term effects of the advertising which, over the course of the next two years, would amount to a full doubling of the first-term impact.”

Adworks 1991

Information Resources Inc. (1991) “How Advertising Works”


Theory – Brand Equity

1. Advertising is a key driver of brand equity2. Brand equity embodies the concept of the long term brand

value

While immediate increases in sales arising from discounts are striking, the effects of discounts and of other components in the marketing mix—such as advertising, new products, and distribution—can be understood only over the long term.

Lodish, Mela 2007

Brands with loyal customers face less pressure to reduce their prices and therefore enjoy a price premium. Together, quantity and price premiums reflect a brand’s long-term health.

Lodish, Mela 2007

Lodish, L. M. and C. F. Mela (2007). "If Brands Are Built over Years, Why Are They Managed over Quarters?" Harvard Business Review.


Methodology


Methodology – Then and nowOriginal Methodology NCS Methodology

Timing

Short Term Lift over a one-year period Lift with a 4-6 week post periodLong term Lift after end of one-year period –

out an additional 1-2 yearsLift after post period – one-year to five-quarters after post period

Multiplier Original 2 years /measured short-term

NCS 1 year or 5-quarters /measured short-term

Method

Short term Lift

Matched HHs Matched HHs

Long Term Lift

Matched HHs Continued value of moving HHs from non-purchase through trial and deeper repeat

TV Exposure Actual Exposure Actual ExposurePurchase Scanner panel Frequent Shopper Panel

Control for Long Term exposure

Assume continued comparable advertising

Assume continued comparable advertising


Critical Measure Identified: Trial and Depth of Repeat

• Trial is identified first:– First time brand buyer in past X period (6 months for these brands)

• Among non-triers – Depth of Repeat– Count of consecutive brand purchase when category was bought– This was capped at 6 to reduce the long tail

10/6/1

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Household X Trial/Depth Status by Purchase Occasion

Brand Dollars Competition Dollars

T0

1 1

2

2

23

4

5

66

60 00


1 5 9 13 17 21 25 3 3 7 11 15 19 23 27 31 35 39 43 47 51 55 59 63

Short-Term Effects Period

Long-Term Measurement Design

Warm-up Period

“Future” Period

1.

2.3.


1. Identify each purchase exposed within 28 days in the analysis period and tag for Trial or Depth of Repeat.

2. For each purchase time-align that purchase as “Week 1,” and measure the weekly “future” purchases for that HH.

3. Average weekly brand dollars per household. 4. The incremental value of a HHs moving up the chain of repeat is calculated and summed across

the entire “future” period.5. This total incremental “future” value is divided by the sales in “Week 1” to get the multiplier.

Long Term Methodology Summary

Wee

ks 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64$0

$1

$2

$3

$4

$5

Special KLong Term Effects

Current and “Future” Weeks

Trial 1 2 34 5 6+ Depth of Repeat


1. Identify each purchase exposed within 28 days in the analysis period and tag for Trial or Depth of Repeat.

2. For each purchase time-align that purchase as “Week 1,” and measure the weekly “future” purchases for that HH.

3. Average weekly brand dollars per household. 4. The incremental value of a HHs moving up the chain of repeat is calculated and summed across

the entire “future” period.5. This total incremental “future” value is divided by the sales in “Week 1” to get the multiplier.

Long Term Methodology Summary

Wee

ks 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64$0

$1

$2

$3

$4

$5



Trial 1 2 3 4 5 6+ Depth of Repeat


What are we measuring?

1. In essence, we are measuring the future value of moving a HH into trial or to a higher depth of purchase among exposed HHs

2. This is a form of customer lifetime value, but only measuring that value out for one-year or five-quarters.

3. The value of moving an exposed HH into trial or a higher depth of repeat is weight averaged by the degree to which the short-term effects drive the movement into trial and deeper repeat.

This method does not measure the direct value of the advertising into the future. The direct value of the advertising is embodied in the short-term effects.


Kellogg’s Special K


Kellogg's Special K Short-term Effects:

Trial 1 2 3 4 5 6+

54.7% 51.9%56.0% 55.6% 54.1% 50.7%

67.0%56.9% 53.4% 58.3% 60.8% 63.4% 65.9%

71.6%

Kellogg's Special K Short-term EffectsNot Exposed Exposed

2.2 1.5 2.4 5.3 9.3 15.2 4.6

Trial Lapsed increasing Loyalty

• Special K’s advertising drove incremental gains across all segments, with the highest lifts being in the most loyal segments with the highest depth of repeat


Kellogg's Special K Short-term Effects:• Translating lift into generated dollars shows the largest gains are among the lapsed and trial

purchases since these are the largest segments (shown on different scales)

Trial 1 2 3 4 5 6+ DepthSeries1

Brand Dollars Generated (Lift) vs.Total Category Dollars

Total Category Dollars

Brand Dollars Generated (Lift)


Kellogg's Special K Short-term Effects:• Translating lift into generated dollars shows the largest gains are among the lapsed and trial

purchases since these are the largest segments (shown on different scales)

Trial 1 2 3 4 5 6+ DepthSeries1

Brand Dollars Generated (Lift) vs.Total Category Dollars

Total Category Dollars

Brand Dollars Generated (Lift)

Stacked Lift

• The lifts are then stacked to show the Short-term Effects


Wee

ks 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64$0

$1

$2

$3

$4

$5



Trial 1 2 34 5 6+ Depth of Repeat

Special K Long Term• Current Week reports week where short-term effects are measured• “Future” period measures weekly dollars for each HH influenced to move their depth of

repeat up one step – from zero to Trial or Depth of Repeat 1, or Depth of Repeat 1 to 2, etc… • The distance between 5 and 6+ is larger because it includes the 7th, 8th, … 142nd, 143rd…


Special K – “Future”• The colored area is the value of moving a HH from one depth of repeat into the next higher

segment (difference in areas under the curves)• The growth in the curves during the first few weeks reflect the purchase cycle for the brand.

Short-

term

Wee

ks 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64$0

$1

$2

$3

$4

$5



Trial 0 -> 1 1->22-> 3 3-> 4 4-> 55-> 6+ Depth of Repeat


MultiplierWhat is the short-term multiplier to get to Long-Term?

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

1.7

3.7

1.2

2.1 1.7 1.9

4.7

2.47

Kellogg's Special K – Long Term Multiplier

Multiplier to five quarters (65 weeks)

Trial 1 2 3 4 5 6+ Depth Total


Five Brands – Long TermSoft Drink B• Note that the value of Trial and 1 is extremely high. 6+ Depth of Repeat is also high due to

the large, thick tail of repeat. This large thick tail is indicative of high brand loyalty• High brand loyalty also translates to a large value of driving trail and switching.

Short-

term

Wee

ks 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64$0.00$0.50$1.00$1.50$2.00$2.50$3.00$3.50$4.00$4.50

Soft Drink B Long Term EffectsValue of Increasing Depth of Repeat




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1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

3.2 2.6

1.1 1.5 1.2 1.0

8.2

3.50

Soft Drink BLong Term Multiplier




Five Brands – Long TermSoft Drink C• Soft Drink C also has extremely high Trial and 1. 6+ Depth of Repeat is again high due to the

large, thick tail of repeat.

Short-

term

Wee

k 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

Soft Drink C Long Term EffectsValue of Increasing Depth of Repeat




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1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0 9.5

2.4

6.0

0.7

3.2 2.3

1.6

2.61

Soft Drink CLong Term Multiplier




Five Brands – Long TermBoxed Prepared Dinner D• This is a smaller brand than the others measured so far. This creates much more volatility

than seen in the other brands.

Short-

Term

Wee

k 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

Boxed Prepared Dinner D Long Term Effects

Value of Increasing Depth of Repeat

Trial 0 -> 1 2-> 33-> 4 4-> 5 5-> 6+ Depth of Repeat



-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

1.2 1.3

0.2

1.0

1.7 1.9

0.1 1.03

Boxed Prepared Dinner D Long Term Multiplier




Five Brands – Long TermToothpaste E• This product takes quite a bit of time to “catch-up” and then begin to decay. This product

has a much longer purchase cycle than the other brands measured.

Short-

Term

Wee

k 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

Toothpaste E Long Term Effects

Value of Increasing Depth of Repeat

Trial 1 24 5 6+ Depth of Repeat



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1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

1.1 0.7 0.3 0.6 0.6 0.5

2.2

0.83

Toothpaste ELong Term Multiplier




Adworks Long Term Effects ResultsCarry-Over Year Two (First Year After Campaign)


Adworks Long Term Effects ResultsYear Three Effects (Second Year After Campaign)


Short-term + Long-Term = Total Value

How Advertising Value Traditionally Works 1 + 1 = 2

NCS’s View on Short-term + Long-Term = Total ValueAdvertising Value

Soft Drink Brand B 1 + 3.5 = 4.5

Soft Drink Brand C 1 + 2.6 = 3.6

Kellogg’s Special K 1 + 2.5 = 3.5

Boxed Prepared Dinner D 1 + 1.0 = 2.0

Toothpaste E 1 + 0.8 = 1.8

Advertising ValueThe NCS multiplier estimates the long-term value, which requires adding the short-term value back in to get the total value of advertising. The total values for these five brands range between 1.8 and 4.5.

Brand F Example

1.5 x 1.2 = Long Term 1.8 + Short Term 1.2 = Total Value 3.0NCS Long Term Multiplier = 1.5; Short Term = 1.2

* 3-year LT Multiplier on 1-year ST** 1-year LT multiplier on 1-week sales preceded by ad exposure within last month

Multiplier on 1-Year*

Multiplier on 1-Month**


ConclusionsAdvertising does have a long term effect and it can be

measured using true single source methodology1

The long term effect varies based on the brand:The long term multiplier varies from a low of .8 to a high of 3.5!

2

3 What’s Next on the Roadmap??:Phase 2 will work to better define short and long-term period definitions to align the multiplier to be operationally utilized with marketing mix model results

More brands, to develop a deeper understanding including non-CPG

Does it vary by media, category, brand, creative, levels of deal?


Thank You

long term ad effectiveness measurement --- t he single source solution

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