Lairig Marketing

Marketing Strategy ROI – Better Before Than After

Excellent question from a student last night, paraphrased as “How close are ROI projections to what the actual return is, once a marketing strategy has been implemented?”

As with any question about marketing return on investment, the answer is woefully inadequate. Yet, we hope and believe, still instructive.

A Rare Occurrence
The context of the question is challenging enough, in that it deals with an ROI developed before something – a new product, a brand relaunch, a new channel of communications – is executed.

The unfortunate reality here: a negligible percentage of marketing activity has been “pre-justified” via an ROI assessment. There is little to go on to answer the student’s question.

That “Best Practices” Thing
Marketers are horrible at sharing case studies and benchmarks across the industry. We discussed it in detail here.

There is no “Library of Marketing ROI.”

No My Yob
Skim through any job description for a marketing role – either client side or agency/services side – and look for a mention of “ROI.” Ten bucks for every one you spot.

Job duty or not, most marketers haven’t been trained on how to do ROI analysis properly. Prove it to yourself by asking ten marketers today what goes in the numerator. Nine out of ten will say revenue. Wrong.

Focus on “Post-Execution” ROI
The good news is that there is plenty of discussion about the topic of ROI. But the bad news follows quickly – 99% of what you will read is about proving ROI post facto.

It’s an exercise in revisionist history, a goat rodeo’s worth of activity looking for any way to justify even the slightest of campaigns (see “Facebook fan ROI” for example), and perhaps even to justify one’s job.

Back to our student: “How close are ROI projections to what the actual return is, once a marketing strategy has been implemented?”

A question so full of “what ifs” that it can’t be answered with a straight face.

It’s hard to tell if the “after” is any good, when there is no true sense of the “before.”

Kraft’s Greek Bailout

Are “Kraft” and “Greek” synonyms? You’d be excused for thinking so, given recent events.

Kraft will separate into two publicly traded companies later this year - one for its grocery business, one for its snacks. Never mind that snacks, such as Kraft’s Oreo cookies for example, are mainly sold in grocery stores. We await each prospectus for the tasty details of which Kraft products go in which Kraft company.

What to name the “new” companies? Follow this logic. The grocery business will be North America focused, and be called Kraft Foods Group. Not the “Grocery” Group, mind you. And, by the way, are snacks not “foods” ?

In any event, snacks will be a global business (see Cadbury acquisition), and will be called Kraft Snacks Group. What? Wait. What? Um, sorry, the snacks company will be called Mondelez. So bad, it comes with a pronunciation guide.

All that craziness swamped a much better strategy story. This one will make a great Harvard Business Review case study for future MBAs.

With no fanfare, Kraft announced in mid-April that it was bailing out of the Greek yogurt market. By the end of March. So, change the tense to “bailed” out.

(By the way, is yogurt a “food” or a “snack”? Discuss.)

Astounding. A market that is barely five years old, with TRIPLE-digit growth rates the past three years, now making up 25% of all yogurt sales in the U.S. And Kraft’s Athenos brand, a follower to market pioneers Chobani and Fage, already drops out.

Why?

It’s a tale of the product lifecycle, its impact on marketing, and profit. In the early stages of a product, every competitor must spend a ton on marketing to develop the market and grab fair share. The product needs to be good, too – another expensive proposition. Not a big deal when prices are near-perfume level, as Greek yogurt is, around 50 cents per ounce.

But when the leader has dominant market share – Chobani in this case, at 60% - Kraft can only look at its single-digit share and know it will never amount to much more. Look out a couple more years, when prices fall to around 40 cents per ounce, and Kraft sees there is really no path to growing a profit in this venture.

Profit. The only true measure of marketing ROI. For yogurt, at least, profit sounded Greek to Kraft.

Procter & Gamble Gambles On Digital

This one has taken on a bit of the old “telephone” game (way before we had the Internet, kids). The last whisper in the chain has been garbled as “P&G has laid off everyone in marketing and will now use only social media, which it says is free.” Not exactly.

Here is what CEO Robert McDonald said on P&G’s Q2 earnings call, as he defended a reduction in ad spend as a percentage of sales:

“In the digital space, with things like Facebook and Google and others, we find that the return on investment of the advertising, when properly designed, when the big idea is there, can be much more efficient.”

Because McDonald used the word “efficient” rather than “effective,” the world can only assume he said what he meant. Is that really P&G's challenge vis-à-vis social media marketing?

Let’s use Tide detergent as an example. Symphony IRI (and many other researchers) claim the brand has U.S. market share north of 40%. Let’s adjust that for heavy users – such as households with six or more kids – and estimate that Tide has 20% penetration.

That would be the rough equivalent of 23.7 million U.S. households. Now, let’s check Tide on the “Big 3 Social Media Thingamajigs”:

• Facebook – 2.7 million “likes”
• Twitter – 20,000 followers
• YouTube – 167 subscribers

If we assume they are all from different households of current Tide users, P&G's social media "pivot" (buzzword of the year!) looks to be a little over 20 million short. And, of course, if you think about the challenge to acquire NEW Tide users via social media, then we are short by somewhere between one and 94.9 million households.

All that pressure on Tide’s 2.7 million Facebook fans. The Old Spice Guy might be pressed into service as the Old Tide Guy.

All in the name of efficiency.

Sling Shot Baby Was A Sure Shot, Baby

Yeah, we know, it’s not the proper spelling of slingshot. But who cares? We’re more interested in taking another bow for our prediction that the Doritos “Sling Shot Baby” Super Bowl spot would take #1 on the USA Today Ad Meter. Without seeing any of the other spots.

This was the proverbial marketing “slam dunk.” (Note to next year's Doritos contestants – start concepting around the Doritos “Slam Dunk” baby.)

You are the leading tortilla chip by far. You have been around forever. Everyone knows who you are. You command a premium, with per-ounce price rising faster than that of gold bullion. You could run campaigns that focus, like most companies do, on

• The heritage and quality of the product
• The breadth of flavors, sizes, etc.
• A direct attack on competitors
• The many, many ways you can enjoy the product
• The emotional benefits the product delivers

But, quite frankly, there is no need. The stuff sells itself. You knew this as far back as 2007, when you asked “consumers” to submit their own Super Bowl spots.

The basic brief is the same – people love Doritos so much they will do anything for them. Or with them. Or to them. Etc. Etc. The submissions flood in, and the excitement mounts.

Most of the other Super Bowl advertisers are not in your fortunate position. They need to craft a compelling story to get people to consider them. The result sometimes is that viewers don’t really get, or care, what those advertisers are hinting at. For example, viewers might think Clint Eastwood is running for President.

“Sling Shot Baby” had winner written all over it. Oddball characters, a baby, baby as hero, and a crazy-ass, nearly believable stunt. Forget how off target it was – babies don’t eat Doritos and neither does anyone over the age of 50 (read: Grandma). It perfectly hit the sweet spot for an audience of 111 million, just one step above the lowest-common denominator, which GoDaddy owns lock, stock and barrel.

No one else had a chance (although, if Budweiser had placed a baby in its "Weego" spot….)

It will be more of the same next Super Bowl. And perhaps for the three Super Bowls after that. But, at some point, you will lose share, badly, and you will need to think about that bulleted list above.

You’ll take back the reins from “consumers” and produce your own Super Bowl spot. And it won’t come close to the top of the USA Today Ad Meter list.

Which will be a good thing. Because it will mean that you are on your way to winning something a little more important.

Philadelphia Newspapers – Make Me A (Better) Offer

It’s rare that a marketer offers a deal that doesn’t draw traffic. Companies are pretty good at knowing whether a price off, or a two-for-one, or even a coupon (for God’s sake) will work, and at what price level.

Throwing in an additional incentive, like free airline tickets, is a bit desperate, but if the ROI is there, it can make sense in many cases.

So how to explain a deal like this one offered by the Philadelphia Media Network (PMN for short)?

“Customers who sign up for a two-year subscription to the package of apps [ed.: for 3 different news websites] for $ 10 per month will pay $ 99 for an Arnova 10 G2 Android tablets for a total price of about $ 339, a 65% discount.”

Eek. The kitchen sink and more. And the sink isn’t even a brand-name sink!

The News Bundle
The “package of apps” refers to The Philadelphia Inquirer, its companion website Philly.com, and sister paper The Philadelphia Daily News. The consumer can get any one of these as an app. What is the value proposition (other than price) of making me take all three?

The Bundle Price
If anyone was nutty enough to get all three apps, they’d be out $ 13. The guys in PMN’s accounting department must have thought a $ 10 bundle price was enough – “they’re getting a 23% discount!” The consumer sees it as a measly $ 3.00 off.

Not enough to push them over a new paywall. Compare it to The New York Times initial offer: 99 cents instead of $ 15.00.

The Incentive Product
“A tablet? Cool. You mean the iPad right? What? No? Oh, an Android one. OK. I guess that Samsung one, right? What? The Armada? Huh? The Terra Nova? What? What the f&ck is Arnova, dude?”

If you can’t give the best, you sow a big seed of doubt.

The Incentive Price
The “go to” price for an incentive is “free.” How can a consumer be expected to know if $ 99 is a good price for a tablet he’s never heard of? Especially when he sees companies all over the country giving away free iPads as incentives?

And putting that $ 339 total price in print is a Bozo No No. The shock of it will prevent the consumer from remembering this is over a two-year period, and the “65% discount” mention doesn’t even register.

Would you be surprised to know that, six weeks later, PMN still has half its inventory of 5000 Arnova tablets on hand?

Maybe it can give them to Best Buy, who can package them with HP’s TouchPad tablet.
For, like, a 65% discount, dude.

Teaching Kids The “Pay” in Paywall

Earlier this year, in a post about the new paywall at The New York Times, we discussed its likely impact on Gen F (aka Millenials, Gen Y) and highlighted this precious quote:

“As a young adult in graduate school, I frequent the Times’s website every morning…classmates and friends share this love for the Times…we can, and will, move to a free option…you will lose the vast majority of young adults…”

That was from a girl named Erin, writing to the Times back then. Wish we could see what she thinks now.

Because, as we predicted in a separate post (and the only blog we know of to say so), the Times paywall has been a success. Beyond the fact that its paying subscriber count is north of 300,000, there is this data point: the number of unique visitors is up.

Still, Gen F is a stubborn sort, so some experienced people are looking to help them down from the ledge, gently.

Press+, a company that manages both sides of paywalls, helping papers set them up and allowing readers to access subscriptions through a single portal, is partnering with the Knight Foundation (which supports advancements in journalism) to help college newspapers set up paywalls for their online versions.

“Hah!” you say. “Suicide. The kids will laugh them right off campus.”

True, if Press+ had done what it traditionally does with paywalls. But it knows the toll that helicopter parenting has taken on this group. Instead, it will install a faux paywall, that will be geared toward “donations” from “parents and alumni.”

Which is kind of how Gen F has been doing things all along.

Ironically, Press+ is providing this service FREE to the first 50 papers that sign up.

A Press+ exec was quoted: “This generation needs to find new revenue streams, including new ways to collect revenues from the readers who get the most value from access.”

That would mean collecting money from fellow students. Until Gen F takes that challenge on, the Press+/Knight Foundation initiative, as laudable as it is, might be the smallest baby step ever taken.

Insider’s View: Lining Google’s Pockets

Piling on to yesterday’s rant about Google search, here’s a personal look at where Google makes 97% of its money – paid search – the majority of it from the shallow coffers of small businesses and organizations.

For roughly four years now, I’ve been the Google “AdWords guy” for a nonprofit. There never seems to be enough time to launch a proper Facebook or Twitter campaign to let people know of our periodic events, so, like many small businesses, we rely on AdWords to drive people to our tiny website.

So, here we are on Rosh Hashanah eve, with an offer of a free dinner and service. In Manhattan. We started our paid search campaign less than a week ago. Since the expense comes from my shrinking bank balance, I minimize bids and daily totals. Expectations couldn’t be lower.

Yet, within a day, our little scoreboard shows that we are showing up! Hundreds of impressions! And even though Google “suggests” keyword prices double what we are bidding, we rank in the top four.

Then the “clicks” come through. Amazingly, they are always 2%. We get 2% click-thru on “Rosh Hashanah,” where our ad has served up 38,806 times. We also get 2% for the alternate spelling (“Hashana”), for which only 2948 impressions have been delivered.

Almost all of our dozen well-performing keywords come in at 2%. Strange coincidence.

But what really counts are what your site visitors do when they click through to your site. We have 849 supposed visitors via AdWords. My credit card is looking at a hit of $269.51. Number of dinner reservations called in so far? Zero.

[Speaking of the High Holy Days, we’ll not post again until next Monday. This will give Google a chance to catch up on its indexing.]

Our silly little website provider’s silly little analytics package doesn’t confirm anywhere near that much site activity. A rational person would halt the campaign. But this is the big day, when thousands of people who have waited this long to finalize plans will search Google for some Rosh Hashanah event advice.

We have no choice.

I expect we will “get” 400 “clicks” today alone. Google has now doubled its suggested price for “Rosh Hashanah” to $1.75, four times our current bid. We will be $500+ in, with most likely zero ROI.

Not that every outcome for all AdWords users is this bad, nor that our website is any good, etc. etc., but it seems easy to figure out how Google can amass $30 billion. Just take 5 million small businesses who are able to say, “what the hell, it’s only $500, what have we got to lose?” and you’ve tallied $2.5 billion.

Paid search is like gambling. You know you should be doing something else with your time, that the whole experience makes you feel a little dirty, that the house is stacked against you, and that you’re not going to win. But you place your bet anyway.

Another form of digital addiction.

Netflix Revised Subscriber Guidance: Netflinch

News so important it interrupts our normally scheduled Friday Fast Four. So important that we’ve upped our word count by 100.

First, we shall break our arm patting our back. Our prediction for this year’s July back in December 2010:

“The financial press is awash in headlines like ‘Netflix: The Best Short Ever?’…”

On July 13th (!!!) Netflix hit its all-time high, just short of $300. Since then it has slid, tripped and finally tumbled to $170. For those that shorted Netflix on the right day, you just made a return of 43%. You can thank us later.

Now to a bit of analysis about Netflix that you will not read anywhere else.

The blogo-rhea is flooded with knee-jerk “examination” of yesterday’s terse but honest guidance from Netflix management. Even Wall Street followed suit (!!!), cutting the share price by nearly 20%. All of this driven by a 2.7% reduction in forecasted subscriber count (and not an “actual” loss as some dopes are reporting).

Because almost all of Netflix’s reduced guidance is from DVD-only subs, here is the typical reaction by bloggers, many who should know better: “Netflix raised its prices too much.”

Oh dear.

Here is what you should really think about. Someone in the corporate strategy department at Netflix fuxed up the forecast. Here are two inputs he or she messed up, and you can also take these as learnings based on the revised guidance.

1) The 800,000 subscriber overestimate in DVD-only means this (and sorry for the caps, but we don’t want skimmers to miss it):

NOT AS MANY HOUSEHOLDS ARE PREPARED TO GO OVER-THE-TOP AS EVERY PUNDIT WITH SIX “CONNECTED” DEVICES BELIEVES.

There are simply too many households without the wherewithal – money, equipment, or knowledge – to watch “TV” on a laptop and/or hook a laptop to the crappy old TV set they own.

Now, as a set-up to the Netflix forecasting mistake/learning #2. Where did those 800,000 go? Notice the Netflix streaming number was also reduced, by 200,000. WHERE DID THE 800,000 GO?

2) The drop in Netflix’s streaming-subscriber guidance means this:

NETFLIX IS MAINLY A SUPPLEMENT TO PAY TV. NOT A REPLACEMENT.

The 800,000 will simply rely on their CURRENT cable or satellite provider for video entertainment. The new, much higher price from Netflix adds 20% or more to the monthly household “TV” outlay.

These households just don’t have the funds for it. Now, and for a long time (see long-term unemployed; and U.S. poverty rate).

Only loyal Lairig Marketing readers will see this Netflix analysis of course. The same ones who could have told their neighbors to get out of NFLX stock in late June or early July.

Meantime, let’s make another prediction: Deep in the basement at Netflix headquarters, a corporate strategist is about to get “streamed.”

Demand Media’s Stock Demands Brakes!

As technology-company IPOs keep coming to market, commentators will typically make reference to those that re-inaugurated the trend, such as Demand Media, LinkedIn, and Pandora. But they never seem to mention where these stocks trade today.

To that end, here is an update on Demand Media.

We’ve written about Demand Media’s business category, the world of content farms, here before. Google did Web searchers a big favor a couple of months ago, by modifying its search algorithm to bury garbage content (see Demand Media). DMD investors have little left to cheer about.

Looking at this from a business model leaves little to cheer about either. A gentleman named Matt Shanahan of Scout Analytics was cited in an excellent article here showing how the old “20/80” rule comes into play for news websites.

Shanahan’s analysis found that heavy readers of online content, what he termed “fans,” make up around 55% of a news site’s traffic (OK, not exactly 20/80, but you get the point). That is why The New York Times online paywall is working (as we predicted.)

And it is why Demand Media’s stock might continue its ride downward. It doesn’t generate “heavy readers” or “fans.” Just fly-by Web searchers (another Shanahan term). DMD’s advertising-based business model requires millions of “fly-bys.” And a million-plus-one the next day, and so on. Google has essentially throttled this type of business model for mediocre content.

Unless Demand Media has a rabbit to pull out of its hat, such as the rumored tie-up with Scripps Interactive, its post-IPO investors – especially those that jumped on in early April – better keep those lap belts tight.

The Ritz-Carlton: Be There Or Foursquare!

If the press release had come out on April 1, I would have understood. But it didn’t (June 27th). The Ritz-Carlton luxury hotel “chain” – all of 75 properties worldwide – ticked off the last box on the social media “you must put your brand here or you will go out of business” strategy ladder.

“…The Ritz-Carlton introduces the World Concierge on Foursquare…Tips will be populated regularly by concierges from all 75 Ritz-Carlton hotels…hundreds of tips and insights about local destinations…”

Here is a tip on foursquare (attention Ritz PR hack: that’s a small “f”) for the apparently unknown “local destination” in Cleveland known as the Rock & Roll Hall of Fame:

“Before you leave, see if you can guess the inspiration for the museum's distinctive shape.”

That’s not “knowledge.” It’s a trivia contest, which I can play online. From home.

Or this one from Toronto:

“Fashion Mile may be the best-known face of Bloor Street, but head west…and you'll find a distinctly different character.”

That’s not “knowledge.” It’s a mystery contest.

There are also tips for the NASCAR Hall of Fame and the French Quarter – a Motel 6 guest’s wet dream.

Here is the Ritz-Carlton CMO: “Luxury consumers trust us and know that we have a wealth of knowledge and expertise at our fingertips…” I’ll leave it to you to check out the hotel’s foursquare followers here. See if you can spot a single “luxury consumer.”

To Ritz-Carlton’s credit: By having concierges post tips on company time, it has shattered the supposition that “you can’t do social media for free.” So, if it sells as much as one diet coke at the hotel bar because of all this knowledge it is giving away, the social media ROI on foursquare will be infinity.

As for actual Ritz-Carlton guests, I don’t think we’ll find them on foursquare. You see, if I can afford to walk through those doors, I’ve already announced that I have checked in, comfortably, into the lap of luxury.