Monthly Archives: February 2013

Are You Measuring The Right Thing?

In a conversation with my financial advisor the other night I asked him why he thought brands advertise. His response was “to get people to try the product”. He couldn’t be more correct. The role of advertising is to generate trial, break penetration into households that have not previously purchased the brand.  We should measure our success based on how well we accomplish that, but in most cases we are not.

Over the last 20 years or so marketers have become enamored with marketing mix modeling in an effort to better understand the contribution of every effort against total sales. The modelers will tell you precisely what percent of sales for the year each effort contributed. It sounds like a good concept but in practice it doesn’t really work. Every market mix modeling exercise I have ever seen analyzes advertising impact against total sales. If advertising’s role is to generate trial for new products and penetration for existing ones why are we measuring its success vs. total sales? We end up undervaluing the impact of advertising and overvalue the impact of in-store promotions.

The modelers are counting every transaction as it crosses the scanner at retail. The model cannot distinguish between the first sale, the second, third or fourth by an individual buyer.  If a product is purchased four times in a year by an ad driven new buyer the model is understating the ads impact by 75%. The ad is only responsible for the first sale. The product performance/satisfaction is responsible for sales 2, 3 and 4. Why is this an important issue? Because sales promotion actually hurts the effect of advertising. Huh? Here’s how it works. Ads get people to consider buying without price incentives. If an ad driven potential new buyer is in the store they are going to take advantage of the price promotion that day. They will not ask to pay full price even though they were willing to before they got in the store. If it’s a repeat buyer whose first purchase was driven by an ad they may even pantry load, taking them out of the market for at least two cycles. The worst thing is since they bought on deal the model gives the in-store promotion the credit for making the sale—even the first one.

We now have the ability, with loyalty card data, to separate first time purchases from repeat ones. We can track not only total sales but the impact ads have on generating new customers. We can better understand individual users repeat rates. We can also test pricing strategies to determine if the in-store pricing is harming profitability/equity. If advertising’s role is to drive trial/penetration our single-minded focus should be on that. Ask yourself: “What am I doing today to bring in new customers?”

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If Content Is King Is Over-Distribution The King Killer?

One of my favorite TV shows is “The Big Bang Theory”.  It’s well written and the characters are some of the best on TV today, most notably Sheldon Cooper played by Jim Parsons who has won multiple awards and critical acclaim for his character. The show is still in original production and I hope it continues to be for some time. 

The show is also on Cable and in Syndication and by my count—I’m not good with numbers is the joke I often tell—I can watch it over 30 times in the next seven days. If next week is a typical week the program is airing over 1,500 times this year.

Funny thing is I find myself watching the repeats and I rarely see the originals in first run. I think it’s because the syndicated airings in NY are ideally timed for my viewing habits.  I’d rather watch movies in Prime or, especially during baseball season, live sports. So the 7:30 and 11:00 PM airings work well because I’m only interested in a short show to carry me over.

Has this over distribution, or should I say saturation hurt the first run airings? Actually it hasn’t. The Syndicated airings w/o 1/14 had a 7.9 rating and the Network Prime airing the following week had a 7.3 rating. Add in the 3 million TBS viewers each week and you have a juggernaut. Of course the Syndicated ratings include multiple airings. People now are as interested in the repeats as they are the originals.

In the past programs were not in original production on Network TV AND in syndication AND Cable simultaneously. It’s a phenomenon of the last twenty years. It may have been Seinfeld and Friends that began this trend. So programs like The Golden Girls would either be off air or at least have announced their end of production before they were distributed in cable and/or syndication. Golden Girls by the way is actually on TV next week more times than Big Bang Theory. It seems like WE and Hallmark have no other programs to air, but that’s another story.

In the case of Seinfeld and Friends both experienced ratings drops in their first runs around the time they syndicated, but that may have introduced the show to new audiences who could catch up because within two seasons they both grew their audiences in first run. But that was before DVR penetration was as high as today and they were watercooler shows, a concept that may no longer exist.

How long can Big Bang Theory be in over-distribution before it becomes tired? In November it reached all time highs in audience levels for first run airings.

Long live the king.

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