FMCG Check Out Research
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Transcript of FMCG Check Out Research
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8/10/2019 FMCG Check Out Research
1/11
CheckoutAnROIanalysis
oftheFMCGsector
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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
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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
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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)
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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.
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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
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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.
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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.
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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
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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%
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RecommendationslOnlineperformswellforFMCGbrands, deliveringstrongandscalableROI.
lLeveragingonlinessynergisticeffects isthesimplestwaytooptimise overallcampaignROI.
lAdjustingthemediamixtoincrease onlinesallocationwilldeliverscalable increasesinROIwhilstincreasingthe durationofcampaignimpact.
lMicrosoftAdvertisingoffersaunique combinationofmassreachand audiencetargetingthatisideally suitedtodrivingFMCGsales.
Tondoutmore,visit www.microsoftadvertising.co.uk [email protected]